With today’s record low interest rates, many Greater Cincinnati and Northern Kentucky homeowner’s are seizing the opportunity to refinance their mortgage.  If you are working your way through the application documents, you will notice that the pile of paper has not gotten any smaller since the last time you applied.  Whether it is a past client calling me for advice on a refinance or buyer client that is applying for a purchase mortgage, one document in particular always brings up a lot of questions.  It is called the “Truth in Lending” statement or TIL.  To those in the real estate and mortgage business, this document has been nicknamed the “Truth in Confusion” statement.  I hope that the points that I offer below will shed some light on the often misunderstood piece in the application and closing process.

  • ANNUAL PERCENTAGE RATE (“APR”) – The Annual Percentage Rate (“APR”) is a measure of the total cost of credit expressed as a yearly rate.  The APR is normally “higher” than the Note Interest Rate since it includes not only the interest over the life of the loan, but also the Prepaid Finance Charges such as buyer’s points, prepaid interest, loan commitment fees, mortgage insurance premiums (if applicable), etc., all considered Finance Charges under the law.

IMPORTANT
The Annual Percentage Rate (“APR”) show on the TIL Statement is NOT the same as the Interest Rate being charged on your mortgage loan.  Additionally, your monthly payments are figured at the “Note Interest Rate”, not the APR.
  • FINANCE CHARGE – Is the total interest you will pay over the life of the loan PLUS the Prepaid Finance charges as described above.
  • AMOUNT FINANCED – is defined under the law as the actual Loan Amount less any Prepaid Finance Charges as described above.  The “Finance Charge” plus the “Amount Financed” on the TIL is equal the “Total of Payments” over the life of the loan.

IMPORTANT
Your Principal and Interest payment will be based on the “Actual” Loan Amount, not the “Amount Financed” which id detailed on the TIL.
  • SCHEDULE OF PAYMENTS – Is the breakdown of the monthly payments you will make over the life of the loan.  These payment amounts include Principal, Interest and Mortgage Insurance Premiums, where applicable.

If you or someone you know is interested in buying or selling real estate in Greater Cincinnati or Northern Kentucky, please call or email Jason Bowman with Re/Max Elite today.