Interest rate
The interest rate is the cost of borrowing the money. It's what determines your monthly principal and interest payment.
Annual percentage rate (APR)
The APR includes the interest rate plus certain loan costs, such as points and some lender fees, spread over the life of the loan. Because it includes those costs, the APR is usually a bit higher than the interest rate.
How to use both
- To compare monthly payments, look at the interest rate.
- To compare overall cost, look at the APR, but only between loans with the same term and type.
- If you may sell or refinance in a few years, the APR can overstate the cost of upfront fees. Ask us to compare total costs over the years you expect to keep the loan.
Where to find them
Both appear on your Loan Estimate, the standard form every lender must give you within three business days of applying. It makes side-by-side comparisons easier.
Frequently asked questions
Why is my APR higher than my rate?
Because it includes certain loan costs, not just interest.
Does APR include everything?
Not every cost. Items like title insurance and appraisal fees may not be included. Your Loan Estimate shows all of them.
Related: What Is a Rate Lock? · Mortgage Calculator