Differences between mortgage interest rate and APR

IT Guy
IT Guy used Ask the Experts™
What are the differences between mortgage interest rate and APR?
Watch Question

Do more with

Expert Office
EXPERT OFFICE® is a registered trademark of EXPERTS EXCHANGE®
The Annual Percentage Rate [APR] can include other costs such as points and fees as well as the mortgage interest.  

The APR gives you a way of comparing the costs of different mortgage options.
mortgage rate is what the mortgage company says it is. Some have highly imaginaive ways of calculating it. (compounded monthly, daily, etc). To make comparisons easier , the APR (annual percentage rate) was devised. It is based on the total interest and fees paid in one year on the amount borrowed. The calculation can become complicated see https://www.thebalance.com/annual-percentage-rate-apr-315533
Front-end Developer
Summary from The difference between your mortgage rate and the annual percentage rate, or APR:

Interest rate is the cost of borrowing the principal loan amount. It can be variable or fixed, but it’s always expressed as a percentage.

is a broader measure of the cost of a mortgage because it reflects the interest rate plus other costs such as broker fees, discount points and some closing costs, expressed as a percentage."

The main difference is that the interest rate calculates what your actual monthly payment will be... The APR calculates the total cost of the loan.

Here it is a youtube video that might help you understand the concept better.

Do more with

Expert Office
Submit tech questions to Ask the Experts™ at any time to receive solutions, advice, and new ideas from leading industry professionals.

Start 7-Day Free Trial