Annual percentage rate (APR)
7.100%
0.1 percentage points above the 7.000% note rate, because of $3,000 in upfront finance charges
Monthly payment
$1,995.91
Amount financed
$297,000
Finance charge
$421,528
Total of payments
$718,528
- Amount financed
- $297,000
- Interest
- $418,528
- Upfront finance charges
- $3,000
- Total of 360 payments
- $718,528
- Note rate
- 7.000%
- Upfront charges are
- $2,500 origination + $500 other
- Loan balance you owe
- $300,000
- APR
- 7.100%
- APR minus note rate
- 0.1 percentage points
- Effective annual rate of the APR (monthly compounding)
- 7.336%
You repay a $300,000 balance, but after the $3,000 in charges paid at closing only $297,000 counts as the amount financed. That makes the APR 7.100%, higher than the 7.000% note rate.
An APR is a nominal yearly rate: the monthly rate times 12. It spreads the finance charge over the full term, so it understates the cost of a loan you repay early.
How finance charges change the APR on this loan
| Finance charges | In dollars | APR | APR minus note rate |
|---|---|---|---|
| Yours (1% of the loan) | $3,000 | 7.100% | 0.1 percentage points |
| 0% of the loan | $0 | 7.000% | 0 percentage points |
| 0.5% of the loan | $1,500 | 7.050% | 0.05 percentage points |
| 1% of the loan | $3,000 | 7.100% | 0.1 percentage points |
| 2% of the loan | $6,000 | 7.201% | 0.201 percentage points |
| 3% of the loan | $9,000 | 7.305% | 0.305 percentage points |
| 4% of the loan | $12,000 | 7.409% | 0.409 percentage points |