What is APR and How Does it Affect Me?
If you are an entrepreneur, looking to scale your businesses, you may need to acquire commercial real estate. Consequently, anytime that you need to invest in or finance your dreams, there is a certain phrase that you may see over and over again. This phrase is the “annual percentage rate, ” otherwise known as, APR.
And let’s be honest, like most mathematical concepts, APR may be difficult to conceptualize in real life. However, we at Lee & Associates, Orange want to help you understand, APR. Simply stated, APR, is just an annual rate charged for borrowing money. It is expressed as a percentage which represents the actual yearly cost of funds, of the loan, over the term, a predetermined amount of time.
APR vs. Interest Rates
To further recognize APR as a key commercial real estate term, it is also wise to understand the difference between APR and interest rate. An interest rate is the rate of interest paid on the loan, which is determined by the lender. As well as, a loan’s interest rate is included in the APR. Furthermore, APR includes the interest rate and fees, giving you the total cost of your loan.
Other Fees Included in the APR
As mentioned earlier, the APR consists of the interest rate, but it also can include other fees as well. Listed below, are a few of these fees :
- Origination Fee: These are commonplace in mortgage loans.
- Appraisal Fee: This is the fee associated with getting an appraisal on a property.
- Points: Discount points are paid to the lender to decrease the interest rate on the home or building. These are paid at the time of closing and can often save you a mint.
- Underwriting Fee: A fee paid to the person who reviews the loan and makes the offer.
- Building Inspections: Anything relating to building inspections will be included.
- Broker’s Fee: This would be applied if you are working with a commercial real estate broker.
- Miscellaneous Fees: These fees can include credit report fees, tax service fees, or document preparation fees.
Final Thoughts
If you have any questions about annual percentage rates, or if you would like more information on acquiring commercial real estate, please contact us today! Likewise, hang out with us on Facebook, LinkedIn, Google+, Instagram, and Twitter.
by Staff Writer, Lee & Associates Orange
