How the payment-flyer APR is calculated

This page documents, in plain terms, exactly how the Annual Percentage Rate (APR) shown on generated payment flyers is calculated, so agents, borrowers, and compliance reviewers can see the inputs and method behind the number rather than take it on faith.

1. Rate source

The note rate used is Freddie Mac's Primary Mortgage Market Survey® (PMMS®) — the national average rate for conventional, conforming, fully-amortizing purchase loans, published weekly (results released Thursdays, based on lender submissions collected the prior Thursday through Wednesday). The survey date used for a given calculation is shown directly on the flyer and in the calculator.

2. Amount financed (Regulation Z)

Under 12 CFR 1026.18(b), the APR is calculated against the amount financed — the loan amount minus prepaid finance charges that are payable to, or retained by, the creditor. This tool defines amount financed as:

Amount Financed = Loan Amount − (1% × Loan Amount) − $1,995

3. Mortgage insurance treatment

Where the entered down payment results in a starting loan-to-value (LTV) above 80%, monthly mortgage insurance is included in the payment stream used to calculate APR — from the first payment until the month the scheduled amortized balance first reaches 80% of the original property value (not appreciated value). From that point forward, MI drops out of the payment stream for the remainder of the term. If the down payment already puts the starting LTV at or below 80%, no MI is included at all.

The monthly MI amount is calculated as the entered annual MI rate × the original loan amount, divided by 12. The MI rate is a user-entered assumption, not a quoted premium — actual MI cost depends on the mortgage insurer, credit score, LTV tier, and coverage type (borrower-paid vs. lender-paid), and should be confirmed against real pricing before this is used in any borrower-facing communication.

4. The actuarial method

With the amount financed and the full monthly payment stream established (principal & interest throughout, plus MI for the months it applies), the APR is solved using the actuarial method described in Regulation Z, Appendix J — the rate that, when used to discount every scheduled payment back to present value, produces a total equal to the amount financed:

Because the payment stream changes when MI drops off partway through the term, there's no closed-form solution — the calculator solves for i numerically (bisection search) rather than with a simple formula. This is the same underlying approach that produces accurate actuarial APRs for any loan whose payment isn't flat for the full term.

5. Temporary buydowns — deliberately excluded

This calculation does not assume or reflect any temporary interest rate buydown (e.g., a 2-1 or 3-2-1 buydown), even where one might be offered on a given transaction.

6. What this is, and isn't

• This is a marketing-flyer illustration tool, not a Loan Estimate or Closing Disclosure.
• It does not constitute a rate lock, a commitment to lend, or pre-qualification.
• Actual rate, APR, and payment for any real transaction depend on the borrower's credit profile, the specific loan program, the property, and market conditions at the time of application, and can and will differ from what a national-average calculation shows.
• The 1-point / $1,995 fee assumption and the MI rate are the specific figures Andy Zemon/Novus Home Mortgage has chosen to illustrate with — they are not universal constants and should be revisited if Novus's actual fee structure changes.