Expert: Marina Lando - 6/29/2006

Question
what is the formula to caculate anual percentage rate

Answer
Dear Teri:

Steps to calculate APR are:
1) Calculate one time fee - cost of loan closing. Add:
  a) Points you pay
  b) Pre-paid interest
  c) Origination fees - processing, underwriting, doc. Preparation
  d) Attorney fees
  e) Notary fees
  f) Private Mortgage Insurance
  g) Application fee
2) Calculate cost-plus-loan. Add one time fees to total loan amount.
3) Calculate monthly payments for cost-plus-loan using interest rate of the loan:

Monthly Payments = cost-plus-loan * [(interest rate*((1+interest rate) power of total number of payments))/(((1+interest rate) power of total number of payments) - 1)]

4) Calculate what would be the interest rate with above monthly payments if applied towards original loan size.

But the easiest way to calculate APR is by using existing calculators :-)  Click on "Advanced mortgage calculator"
http://www.wlgweb.com/Lending/MortgageBasics/calculators.asp


Sincerely,
Marina Lando
President
Business Loan Quest
www.blquest.biz
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"It is not because things are difficult that we do not dare, it is because we do not dare that they are difficult." --- Seneca