Mortgage Truth-in-Lending Statement Overview and Example

Harry Jensen, Trusted Mortgage Expert with 45+ Years of Experience

May 21, 2018

Please note that the Truth-in-Lending Statement was replaced by the Loan Estimate effective October 3rd, 2015 and is no longer used in the mortgage process. We provide the Truth-in-Lending Statement Key Features overview below for your reference but recommend that you review the Loan Estimate for more current information

The Truth-in-Lending Statement contains information about mortgage costs and features such as the Annual Percentage Rate (APR) and Finance Charge.

• Review our Overview and Example of the APR for a mortgage

In addition to the APR and Finance Charge the other key item included in the Truth-in-Lending Statement is the Indication of Key Mortgage Features. The Indication of Key Mortgage Features addresses the mechanics of your mortgage such as potential balloon payments, possible changes in interest rate over the term of the mortgage (for Adjustable Rate and Interest Only Mortgages) and other possible costs such as prepayment penalties and late payment charges.

• 

  Truth-in-Lending Statement Overview Video

The table below outlines and describes the key mortgage features addressed in the Truth-In-Lending Statement.

• Other TIL Statement Mortgage Features

  Demand Feature

  • If your loan has a demand feature, which is more commonly referred to as a balloon payment, you are required to pay off the balance of your loan at the end of the term of the loan
  • A loan with a demand feature / balloon payment, typically involves the borrower paying off a significant amount at the end of the loan, as opposed to paying the loan off a little bit every month over the life of the loan
  • The TIL Statement lets the borrower know that he or she is on the hook for this payment

  Variable Feature

  • If your loan has a variable feature, it means that your interest rate could change over the life of the loan
  • Adjustable Rate Mortgages (ARMs) and Interest Only Mortgages have variable features as the interest rate will very likely fluctuate over the course of the mortgage
  • If your loan has a variable feature, the lender is required to provide additional disclosure that estimates your projected monthly mortgage payment at potential future interest rates

  Prepayment penalty

  • Some mortgages require the borrower to pay a penalty if you repay the loan in full prior to a specified term
  • You should avoid prepayment penalties

  Late Charge Policy

  • Fee charged to the borrower if you do not make your monthly mortgage payment on time
  • You should avoid late charges

  Homeowners Insurance Cost (also known as Hazard Insurance)

  • Estimated cost for the borrower to obtain homeowners insurance
  • Required by lender for you to obtain a mortgage

  Mortgage Assumability

  • Indicates if you can transfer your mortgage to another party if someone buys your property
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Sources

Truth-in-Lending Statement: https://www.consumerfinance.gov/ask-cfpb/what-is-a-truth-in-lending-disclosure-en-180/

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