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Annual Percentage Rate (A.P.R.) The actual cost of a mortgage loan expressed as a yearly rate. The APR will be higher than the interest rate stated on the application and note because it includes fees such as: interest, discount points, origination fee, mortgage insurance and other related fees. The truth in lending act requires lenders to disclose an APR to assist the borrower in measuring the actual cost of a loan. | |
Debt ratio or Debt-to-Income Ratio The ratio, expressed as a percentage, is calculated by dividing the monthly payment of long-term debts by gross monthly income. | |
Interest-only payments Mortgage payments that include only interest. No loan amortization occurs and, thus, the homeowner does not accrue any equity (unless the home value increases). | |
Wraparound Mortgage Results when an existing assumable loan is combined with a new loan, resulting in an interest rate somewhere between the old rate and the current market rate. The payments are made to a second lender or the previous homeowner, who then forwards the payments to the first lender after taking the additional amount off the top. | |