APR vs. APY

By
Real Estate Broker/Owner with Real Estate Muses

 

Hi- If anyone has ever had the question of what is the difference between APR and APY, this could be helpful information.  I just recently had this question come up from a first time buyer.

Do not be concerned as much with the talk of interest rate, rather request a GFE (good faith estimate) which is a disclosure of all the fees and charges associated with the loan. This way you can compare apples to apples. You want to look for a rate that has the APR (annual percentage rate) and APY (annual percentage yield) as close to each other as possible. The difference in these two rates is really what you are paying in fees and associated costs for the loan.

For example a lender may advertise a loan rate of 6.25% but in the fine print mention its APY of 7.5%. That first rate may sound great, but it is not nearly as attractive as a loan that is 6.45% with an APY of 6.5% over the life of the loan. As borrowers we are always hearing about interest rates, searching for the lowest possible rates, listening to what the federal reserve is going to do with the rates, but lenders disguise rates with the APR disclosure in big bold type while really the APY reflects the intra-year compounding that is happening silently behind the scenes so my suggestion is to make sure that you shop your loan with several people if you can and make certain that the offers that you get compare on other levels besides the advertised interest rate.  Make sure to ask for a good faith estimate.

Comments (6)

Laurie Clark CRB Angel Realty LLC Your Monument Realtor 719-502-6572
CRB-CCSS-ASD-HBS-RSD-Denver Short Sale Agents - Monument, CO
Angel Realty, LLC

This is great information to share with everyone - shows your expertise for buyers in San Antonio.

I will look forward to reading more of your posts.

 

Sep 22, 2011 06:54 AM
Stephanie Anson
Anson Properties - Gainesville, FL
Estates | Homes | Land | Investments

You Client is very Blessed to have you as his San Antonio Short Sale Agent, you definitely know this business and you can help a lot of buyer's find the perfect home with a price that won't hurt them in the long run. Congratulations on your first article!

Mar 22, 2012 08:45 AM
Kim & Kristine Halverson
Compass - Santa Monica, CA
Sisters, Realtors

Hi Melissa,Great Blog here.Very Informative and straight to the point.Keep it up and I will be definitely looking forward for some more blogs.

Cheers!

 

 

Mar 26, 2012 02:45 AM
Erika Rogers
Red Rock Real Estate ~ Southern Utah's Largest Independent Brokerage - Saint George, UT
St George Utah Real Estate & Relocation Specialist

Great post Melissa. This is indeed very informative and easy to understand. This is something that everyone needs to know. Stay as number one San Antonio Short Sale Agent.

Dec 30, 2012 04:21 PM
Bas Panch
SCV Home Buyer - Valencia, CA

Hi Mellisa, thanks for this informative post. Your expertise as a top notch San Antonio Short Sale Agent will surely help a lot who wants to get a home in San Antonio.

Dec 30, 2012 05:13 PM
Katerina Gasset
Get It Done For Me Virtual Services - Wellington, FL
Get It Done For Me Virtual Services

Nice article. You are right, this is really interesting Melissa. Thanks for sharing these blog! Cheers!

May 09, 2014 10:28 PM