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A borrower takes a $300,000 loan and pays $4,500 in prepaid finance charges (origination fee and discount points) at closing. What is the amount financed on the Truth in Lending disclosures?
Amount financed is, in short, the loan amount minus prepaid finance charges (12 CFR 1026.18(b)): $300,000 - $4,500 = $295,500. Because the APR is calculated on the amount financed while payments are based on the full $300,000, the APR comes out higher than the note rate. The most tempting mistake is using the $300,000 note amount, as if charges paid in cash did not reduce the amount financed. $304,500 adds the charges as if they were financed on top, and $299,550 slips a decimal and subtracts $450. Source: 12 CFR 1026.18(b); 12 CFR 1026.22 (as at 11 Oct 2026).
Using the note amount as the amount financed; prepaid finance charges come off first.
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