Finance
A Montana buyer who is quoted an annual percentage rate (APR) higher than the note rate on their mortgage should understand that:
AThe lender is charging an illegal premium
BThe APR reflects the true cost of borrowing including fees and closing costs, not just the interest rate✓ Correct
CThe APR and note rate should always be identical
DThe higher APR means the loan has a prepayment penalty
Explanation
The APR is almost always higher than the note rate because it incorporates certain fees and costs beyond just interest (origination fees, mortgage insurance, some closing costs) and expresses the total cost as a single annual percentage. A higher APR relative to the note rate indicates more fees are being charged.
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