Also written as:
APR
The annualized cost of your mortgage including interest AND most lender fees. APR is usually a bit higher than the interest rate alone and gives you a better way to compare loans.
APR — Annual Percentage Rate — is the rate that reflects the true yearly cost of your mortgage. It bundles the interest rate with most of the upfront fees the lender charges (origination fee, discount points, certain closing costs) and expresses the whole thing as one number.
That's why APR is usually a little higher than the interest rate you see advertised. Two loans with the same interest rate can have different APRs depending on what fees the lender packs in. APR is the smarter way to compare offers because it shows you the total cost, not just the headline rate.
One caveat: APR assumes you'll keep the loan for the full term. If you sell or refinance early, the upfront fees feel proportionally bigger, and the "real" rate you paid is higher than the APR suggests.
Example
A 6.5% interest rate loan with $4,000 in lender fees might have an APR of 6.72%. A no-fee loan at the same 6.5% rate has an APR that matches — 6.5%. The first one costs more even though the rate looks identical.
Also known as
APR, annual percentage rate
Source:
CFPB