Comparing APR and total loan cost
Frequently Asked Questions
Straight answers to the questions we hear most.
The interest rate is the cost you pay each year to borrow the money, excluding any fees. The APR includes the interest rate plus other costs like origination fees, discount points, and certain closing costs, giving you a more complete picture of the loan’s true annual cost.
No. The APR is an annualized rate that reflects the cost of the loan each year. The total interest paid is the sum of all interest payments over the entire life of the loan, which will be a much larger dollar figure.
Interest Rate: The cost of borrowing the principal loan amount, which determines your monthly principal and interest payment.
Annual Percentage Rate (APR): A broader measure of the cost of your mortgage, expressed as a yearly rate. It includes your interest rate plus other costs like lender fees, broker fees, closing costs, and mortgage insurance. The APR is typically higher than the interest rate and gives you a better picture of the loan’s true annual cost.
Annual Percentage Rate (APR): A broader measure of the cost of your mortgage, expressed as a yearly rate. It includes your interest rate plus other costs like lender fees, broker fees, closing costs, and mortgage insurance. The APR is typically higher than the interest rate and gives you a better picture of the loan’s true annual cost.
This usually comes down to fees. If Lender A and Lender B offer the same 6.5% interest rate, but Lender A has higher origination fees, their APR will be higher. This highlights why comparing APRs is essential for identifying the most cost-effective lender.
For a fixed-rate mortgage, the APR is locked in at closing and will not change. For an Adjustable-Rate Mortgage (ARM), the initial APR is fixed for a set period, but after that, it can fluctuate based on the index and margin outlined in your loan agreement.
Get weekly rate updates and mortgage tips
Are you interested in learning more about mortgage brokers in your area? Tell us a bit about yourself and we'll point you in the right direction — no spam, unsubscribe anytime.