Average Prime Offer Rate Calculator

APOR Formula:

\[ APOR = \frac{\sum_{i=1}^{n} Quoted\ Rate_i}{n} \]

Average Prime Offer Rate (APOR):

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1. What is Average Prime Offer Rate (APOR)?

The Average Prime Offer Rate (APOR) is a survey-based estimate of annual percentage rates (APRs) currently offered on prime mortgage loans by a representative sample of creditors for mortgage transactions. It serves as a benchmark for determining whether a loan is a "higher-priced mortgage loan" under regulatory guidelines.

2. How Does the Calculator Work?

The calculator uses the APOR formula:

\[ APOR = \frac{\sum_{i=1}^{n} Quoted\ Rate_i}{n} \]

Where:

\( Quoted\ Rate_i \) — Individual quoted interest rate percentage
\( n \) — Number of quoted rates
\( \sum \) — Summation of all quoted rates

Explanation: The equation calculates the simple arithmetic mean of all quoted rates for similar loan products to determine the average prime offer rate.

3. Importance of APOR Calculation

Details: APOR is crucial for regulatory compliance, particularly in identifying higher-priced mortgage loans under the Truth in Lending Act. Lenders use APOR to ensure they are offering competitive rates and to assess loan pricing relative to market benchmarks.

4. Using the Calculator

Tips: Enter multiple quoted rates separated by commas (e.g., "4.25, 4.30, 4.15, 4.20"). All values must be valid percentage rates greater than zero. The calculator will compute the average of all provided rates.

5. Frequently Asked Questions (FAQ)

Q1: What is the difference between APOR and APR?
A: APOR is an average of quoted rates for prime loans, while APR includes both interest rate and certain fees to show the total cost of borrowing expressed as a yearly rate.

Q2: How often is APOR updated?
A: APOR rates are typically updated weekly by regulatory agencies and financial institutions to reflect current market conditions.

Q3: What constitutes a "higher-priced mortgage loan"?
A: Generally, a first-lien mortgage is higher-priced if its APR exceeds APOR by 1.5 percentage points or more; for subordinate liens, the threshold is 3.5 percentage points.

Q4: Why is APOR important for lenders?
A: APOR helps lenders price loans competitively, ensure regulatory compliance, and identify loans that may require additional consumer protections under federal law.

Q5: Can APOR vary by loan type?
A: Yes, APOR rates are typically calculated separately for different loan products (conventional, FHA, VA) and loan terms (15-year, 30-year) to provide accurate benchmarks.