When refinancing an existing loan it is important to know what the borrower expects from the lender. This factor is important, as Refinance is a process of mutual benefit, to the borrower and the lender. It is of mutual benefit because the borrower gets a lot of instant money needed for a purchase or investment; and the lender gets the long-term interest that will accrue on the loan.
Today, the Refinance industry is functioning in a highly competitive environment, like other industries. This paves the way for the borrower to shop around and identify the most suitable lender. When doing so, the first thing that comes to the borrower's mind would be, "Is this Refinance plan affordable?"
The single most powerful factor that makes any particular Refinance affordable or not is the Refinance Rate. The Refinance Rate largely depends upon the interest accrued on the Refinance loan. The Refinance Rate is expressed as the Annual Percentage Rate [APR]. APR is the total amount of money repayable by the borrower to the lender on a loan, per annum. Though APR is expressed as a percentage of the Refinance amount that is borrowed, unlike interest rates, it includes additional fees. In other words, APR means the interest fees on the principal plus additional fees. The Federal Truth in Lending Act makes it obligatory for the Refinance firms to disclose the APR in all loan agreements.
Hence, borrowers can use the APR as an excellent basis for comparing the costs of loans and selecting the most appropriate option.
