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What's the difference between mortgage interest rate and APR?

Jim Quist Dec 10, 2022 12:30:00 PM

Because the APR represents the overall cost of your mortgage, it should make it easier for you to compare loan offers to find the best deal on your mortgage. 

However, APR can vary depending on the mortgage lender because some calculate it differently. For this reason, look at the interest rate, loan costs, and APR when shopping for a mortgage. 

Our Loan Estimate Explainer will help you compare offers to get the best deal on a mortgage.


What's a mortgage interest rate?

The interest is the price you pay to borrow money to buy a home. For example, when you take out a mortgage, you agree to pay back the original amount you borrowed plus a percentage of the loan amount as interest. The interest rate or note rate is the cost you pay each year for the loan, not including the fees to get the loan.

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What's an APR? 

The Annual Percentage Rate is more comprehensive because it represents the total cost of the loan. The APR is your annual interest rate plus any costs or fees for getting the loan. Because it factors in both the interest rate and expenses, the APR is usually higher than the note rate. 

Some of the fees factored into the APR include:

  • Interest rate
  • Lender origination charges such as discount points, underwriting, and processing fees 
  • Some third-party costs, like the title company's settlement fee

Compare your loan options, including current rates, payments, and closing costs, online, 24/7. Then, run as many scenarios as you like for free. After that, you'll know what to expect and feel confident about buying a home.  

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Jim Quist NewCastle Home Loans
President and Founder of NewCastle Home Loans. Jim has been in the mortgage business for 20+ years.

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