What does TILA Mortgage Mean ?

    The Truth in Lending Act, or TILA, was created to protect consumers by requiring lenders to fully disclose the terms and cost of mortgages and other consumer lending transactions. TILA disclosure forms will be part of every refinance loan application package. TILA also affects mortgages in other ways--for example, borrowers have a three day right of rescission involving loans against their primary residences. TILA disclosure must also be given by debt consolidation lenders and others who make home equity and other consumer loans. 

    TILA mortgage disclosure depicts the cost of credit in different ways. As an APR, or annual percentage rate, and as a finance charge, which will show how much interest you will pay over the life of the loan. TILA disclosures allow mortgage borrowers to compare loans by looking at the APRs and finance charges. 

    The TILA mortgage disclosure also informs borrowers of other features of the loan, such as variable rates, demand clauses (which force you to repay the loan if you sell the house), prepayment penalties, and late payment fees. 

    While the TILA lender disclosure forms have their shortcomings (there are differences between lenders in how they calculate their APRs, for example), they do offer more information to the borrowers and set some boundaries for lenders. And the APR on the disclosure form does have to be reasonably close to what the borrower actually pays (it may be rounded to the nearest .25 percent).  

    Borrowers should always request a TILA and other disclosures from lenders when shopping for mortgages. It makes comparing loans easier.