Lower mortgage rate does not equal better

[spidey07]

Advertised rate = 5%. Buy your house now!

APY = 7.97.

Buyer beware of the difference between APR and APY.

 

[mugs]

APR

 

[Vic]

I think you mean the difference between note rate and APR.

APY is annual percentage yield.

 

[spidey07]

Originally posted by: Vic


I think you mean the difference between note rate and APR.

APY is annual percentage yield.

It's late. You know what I'm talking about.

Ticked at deception - get a super low rate! *small print* APY is a few points higher because we compound weekly.

 

[mugs]

Even if they're compounding weekly or continuously or whatever, I don't see how you can get that big a difference.

There must be something else going on. I've seen ads from Quicken Loans that claimed ridiculously low payments, but if you look at the fine print the initial rate is 2% and it adjusts after 6 months.

 

[Vic]

Mortgages are always per diem (compounded daily). That's the law.

And APR always applies on debts. APY is for savings accounts, etc. Your misuse of that term is what's getting to me.

The "get a super low rate" with a high APR is because it's an ARM with a lot of upfront points/fees. The difference you're complaining about it that between the note rate, or the interest rate upon which your initial monthly payments are based on along with the gross loan amount as disclosed on the note (or mortgage document, depending on state), and the APR disclosed on the TIL which is based upon the "amount financed" (gross loan amount minus points/fees) factored in with projected future interest rate increases (margin plus index at TODAY's value) divided by term.

 

[Vic]

Originally posted by: mugs
Even if they're compounding weekly or continuously or whatever, I don't see how you can get that big a difference.

Highly discounted initial ("teaser") rate. When signing an ARM, the initial rate is meaningless. The margin over the index is the actual rate.
Don't get me started at the way Quicken advertises their negam crap. They're right up there with Lending Tree when it comes to highly questionable (shall we dare say fraudulent?) advertising.

 

[spidey07]

Originally posted by: Vic
Mortgages are always per diem (compounded daily). That's the law.

And APR always applies on debts. APY is for savings accounts, etc. Your misuse of that term is what's getting to me.

The "get a super low rate" with a high APR is because it's an ARM with a lot of upfront points/fees. The difference you're complaining about it that between the note rate, or the interest rate upon which your initial monthly payments are based on along with the gross loan amount as disclosed on the note (or mortgage document, depending on state), and the APR disclosed on the TIL which is based upon the "amount financed" (gross loan amount minus points/fees) factored in with projected future interest rate increases (margin plus index at TODAY's value) divided by term.

Oh just stop it....you're not at work.

I was whining about the "get a super low rate! It's better!"....fine print "apy = 7.9%.

In other words buyer beware, read the fine print and look at the amortization schedule.

 

[mugs]

That's the third time you used APY incorrectly, and the second after you were corrected.

 

[spidey07]

Originally posted by: mugs
That's the third time you used APY incorrectly, and the second after you were corrected.

And an anagram for you handle is SMUG....

your point?

 

[waggy]

Originally posted by: Vic

Originally posted by: mugs
Even if they're compounding weekly or continuously or whatever, I don't see how you can get that big a difference.

Highly discounted initial ("teaser") rate. When signing an ARM, the initial rate is meaningless. The margin over the index is the actual rate.
Don't get me started at the way Quicken advertises their negam crap. They're right up there with Lending Tree when it comes to highly questionable (shall we dare say fraudulent?) advertising.

whats so bad about it? i don't trust it myself. something about it seems wrong. but i do not know enough about such stuff (always get a fixed % none of this arm BS or points).

just wonder how they can say the mortgage is $300 a month with them but $700 with someone else.

 

[Vic]

Originally posted by: waggy

Originally posted by: Vic

Originally posted by: mugs
Even if they're compounding weekly or continuously or whatever, I don't see how you can get that big a difference.

Highly discounted initial ("teaser") rate. When signing an ARM, the initial rate is meaningless. The margin over the index is the actual rate.
Don't get me started at the way Quicken advertises their negam crap. They're right up there with Lending Tree when it comes to highly questionable (shall we dare say fraudulent?) advertising.

whats so bad about it? i don't trust it myself. something about it seems wrong. but i do not know enough about such stuff (always get a fixed % none of this arm BS or points).

just wonder how they can say the mortgage is $300 a month with them but $700 with someone else.

Negative amortization

 

[DrPizza]

Originally posted by: spidey07

Originally posted by: Vic


I think you mean the difference between note rate and APR.

APY is annual percentage yield.

It's late. You know what I'm talking about.

Ticked at deception - get a super low rate! *small print* APY is a few points higher because we compound weekly.

Even if they compound every SECOND it wouldn't make that big of a difference.
Or, they could compound every millionth of a second... again, it would hardly make a noticeable difference over compounding every day.

Here's a simpler example (where payments aren't being made monthly)

A=P(1+r/n)^(nt)
That formula will calculate the value at time t (in years), r is the interest rate, and n is the number of times it's compounded per year.

The limit as n -> infinity (compounding continuously) is a simple exponential function, as one might expect:

A = Pe^(rt) (e is Euler's number ~2.7182818)