I can not speak to precisely whay the mortgage person would off you that figure of 4.61 at the current rate, except that minimum can fluctuate day to day.
The IRS AFR is a different figure than the one used by the commercial lender who follows the interbank rates. However he may have been quaoting from the AFR as well, because 4.61 is close to the AFR rate listed in the March and April publications. Most mortgages are considered long term.
The IRS holds you to the minimum interest listed in the monthly AFR. That publication changes evey month.
Go by the AFR Rate for your loan period and compounding frequency.
this is the table you should be using If you close on the loan in:
Mid term are loans of 3 but not more than 9 years.
long term are loans of more than 9 years.
You select the table you will be using, (if less than 250,000 table one) and then select the AFR. To the left of the AFR is a figure tha says 110% etc of the AFR. You multiple the AFR by that percentage to get the actual interest to charge.
Ok let me make this easy for you.
use table 1 (because this is the classification of your loan and purpose)
us in the long term section, under the compouding column you choose for your loan instrumet. (you can pick, etc. I recommend monthly, but you may choose annual, etc.)
Use the top line only, NOT the ones with the percentages. the line across the top that says AFR with no precentage. (this will meet the requirements of the IRS)
The commercial lender would use a diffent table and lines. Forget what I said about the 250,000 loan.
If you write a note for a 9 year or less note, you can choose the lower midterm rate, and it will not raise a flag. If it did, the IRS would want to see the note, and as long as the note was for a 9 year loan, then it would be ok.