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

What the interest rate tells you

The interest rate directly affects the principal-and-interest portion of the mortgage payment. It does not by itself show every fee or the full monthly housing cost.

What APR adds

APR incorporates certain charges into an annualized measure of borrowing cost. Because it includes more than interest, APR is commonly higher than the stated interest rate.

A lower rate can come with more upfront cost

Discount points can lower an interest rate while increasing upfront cost. A lender credit can reduce upfront charges while generally being paired with a higher rate.

That is why rate and APR should be considered alongside fees and the time you expect to keep the loan.

APR has limits

APR is most useful when comparing similar loan types and assumptions. It is not the monthly payment, does not include every possible cost and may not reflect what happens if you sell or refinance earlier than assumed.

Where to find it

The Loan Estimate shows the interest rate on the first page and APR in the Comparisons section on page three. Review both in the official disclosure.

Compare the whole offer

Organize rate, APR, points, credits, fees and cash to close across the official Loan Estimates.

A qualified mortgage professional can help explain the tradeoffs, but the lender’s official disclosures remain authoritative.