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What is the difference between a mortgage interest rate and an APR?

An annual percentage rate (APR) reflects the mortgage interest rate plus other charges. 

There are many costs associated with taking out a mortgage. These include:

  • The interest rate
  • Points
  • Fees
  • Other charges

The interest rate is the cost you will pay each year to borrow the money, expressed as a percentage rate. It does not reflect fees or any other charges you may have to pay for the loan.

An annual percentage rate (APR) is a broader measure of the cost of borrowing money than the interest rate. The APR reflects the interest rate, any points, mortgage broker fees, and other charges that you pay to get the loan. For that reason, your APR is usually higher than your interest rate.

If you have applied for a mortgage and received a Loan Estimate from one or more lenders, you can find the interest rate on page 1 under “Loan Terms,” and the APR on page 3 under “Comparisons.” 

Tip: Take care when comparing loan options to be sure you understand any differences between the terms being offered:

  • Take care when comparing the APRs of adjustable-rate mortgage loans. For adjustable rate mortgage loans, the APR does not reflect the maximum interest rate of the loan. 
  • Be careful when comparing the APRs of fixed-rate loans with the APRs of adjustable-rate loans, or when comparing the APRs of different adjustable-rate loans.  
  • Be careful about comparing the APR of a closed-end loan, which includes fees, to the APR of a home equity line of credit, which doesn’t. Don’t look at the APR alone in determining what loan makes the most sense for your circumstances. Look at this explainer for an example of how interest rates and APRs differ for adjustable rate loans.

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