Truth-In-
Lending Act
TIL Spelled Out
TIL Spelled Out
Truth In Lending Handbook
For a detailed explanation
You are almost there! After filling out applications, digging up all those financial records, and watching interest rates, you're almost ready to close the new mortgage. The finish line is in sight!
But wait! Just as you're preparing to breathe a sign of relief, you receive a Truth In Lending document. Yes, it's yet another disclosure, another standard form meant to provide you with more information. The Disclosure is designed to give you information about the costs of your loan so that you may compare these costs with those of other loan programs or lenders.
Good intentions aside, the document often causes more questions than providing answers. But luckily you're working with us at Lightning Mortgage. We'll explain this very confusing document. The summary at the top of the form is in table form:
ANNUAL PERCENTAGE RATE
The cost of your credit at a yearly rate
A%FINANCE
CHARGE
The dollar amount the credit will cost you
$B
AMOUNT FINANCED
The amount of credit provided to you or on your behalf
$C
TOTAL OF PAYMENTS
The amount you will have paid after you have made all payments as scheduled
$D
B
C
D
Annual
Percentage
Rate
Finance
Charge
Amount
Financed
Total Of
Payments
The Annual Percentage Rate (APR) is the cost of your credit expressed as an annual rate. This is not necessarily equal to the loan interest rate! Click APR, Revealed for a more detailed description of APR and its relationship to your mortgage's interest rate.
The Finance Charge is the cost of credit expressed in dollars. It is the total amount of interest calculated at the interest rate over the life of the loan, plus Prepaid Finance Charges and the total amount of any required mortgage insurance charged over the life of the loan. This would cost only if you kept the loan for the entire loan term.
The Amount Financed is the loan amount applied for, plus or minus the Prepaid Finance Charges. When purchasing, Prepaid Finance Charges include items paid at or before settlement, such as loan origination, commitment or discount fees ('points'), adjusted interest, and initial mortgage insurance premium. The Amount Financed is lower than the amount you applied for because it represents a NET figure. If you applied for $150,000 and the Prepaid Finance Charges total $12,000, the Amount Financed would be $138,000.
When refinancing, one normally includes Prepaid Finance Charges in the loan amount over and above the cost to payoff ant existing loans on the property.
This figure represents the total amount you will have paid if you make the minimum required payments for the entire term of the loan. This includes principal, interest, and mortgage insurance premiums, but does not include payments for real estate taxes or property insurance premiums.
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