APR (Annual Percentage Rate)

APR stands for Annual Percentage Rate. On a mortgage, it's a broader measure of the loan's cost than the interest rate alone. While the interest rate is what you pay on the borrowed money, the APR includes the interest rate plus certain fees (like origination fees, discount points, and some closing costs) spread across the life of the loan.

Two loans with the same interest rate can have different APRs if one comes with higher lender fees. That's why APR can be a useful comparison tool when you're shopping for a mortgage.

The APR will almost always be slightly higher than the stated interest rate.

APR helps you compare the true cost of different loan offers. A lender might offer a lower interest rate but charge higher fees, making the overall loan more expensive than a competitor with a higher rate but lower fees. APR rolls this together into one number.

When comparing mortgage offers, look at both the interest rate (which affects your monthly payment) and the APR (which reflects total cost including fees). They tell different parts of the story.

Lender A offers a 7.0% interest rate with $3,000 in origination fees, resulting in a 7.25% APR. Lender B offers a 7.1% interest rate with $500 in origination fees, resulting in a 7.18% APR. Despite having the higher interest rate, Lender B's loan is actually cheaper overall when fees are considered.

"APR is the same as the interest rate."

They're related, but different. The interest rate determines your monthly payment amount. APR includes additional costs and is useful for comparing the total cost of loan options. When someone advertises a very low interest rate, check the APR: sometimes low rates come with high fees that make the loan more expensive overall.