What is an APR?
and What does it tell me?

Mph, wpm, AARP, NFL, GOP, everywhere we turn we are inundated with acronyms.  We are usually familiar with the ones that affect us directly or whose repetition makes them recognizable. Yet, with so many organizations using their own acronymic language, there are some first-letter-only names that impact us all, such as the IRS.

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One of these infamous terms is APR - Annual Percentage Rate.  The APR of a mortgage is the rate at which the lending institution is going to charge you to use their money.   The rate periodically adjusts as a result of governmental fiscal (monetary) policy measures as well as other economic factors.  Historically, the rate has been as high as 18.45% in 1981 with an all-time low of 5.23% in 2003.  Of course this is a simplified definition of what an APR really is.  The truth-in-lending law requires that a lender is to calculate the loan's APR whenever they quote an interest rate.  The intent of this law is to help consumers make educated decisions amongst the various loan types and numerous lenders, as well as requiring lenders to be fair and honest in their lending practices.  In addition to the disclosed rate, the APR will also include prepaid fees and charges that occur during the process of obtaining financing.  It is important to note that the resulting APR will invariably be more than the original quoted rate; unless, of course, you have a way of obtaining a fee free mortgage. Careful consideration should be given to finding the best possible rate for the specific type of loan that you are looking for.