Difference between mortgage interest rate vs apr

Mortgage Interest Rate vs APR

Shopping for a mortgage?  What is the difference between a mortgage interest rate vs APR? A simple understanding can save you a ton of money on your loan.

Interest Rate:

Mortgage interest rates are a percentage-based number that will be paid on the principal loan amount throughout its 15 or 30-year life. This is normally the first number you will see when comparing mortgage rates.

Obviously, the lower the interest rate percentage, the less you will pay in interest throughout the loan.

Remember, the interest rates advertised are normally the lowest offered and only available for those who qualify by Credit Score.

Learn more about How a credit score is calculated so that you can qualify for the lowest mortgage interest rates available! Why does qualifying for the lowest interest rate matter? This is critical because a slight variation in percent interest can save or cost you thousands to tens of thousands of dollars throughout a 15 or 30-year loan.


The loan’s APR or Annual Percentage Rate is normally listed side by side with the interest rate. You might ask, “Why is the APR value always slightly higher than your basic interest rate?”

The APR includes fees you will be paying in addition to the interest rate on the loan. An APR is a more inclusive percentage rate of what the mortgage will cost you. Banks are banks, they will “nickel and dime” you til the cows come home!

That is why the Federal Truth in Lending Act now requires that lenders disclose what the APR of the loan is so that you can get a “real feel” for what that new house is going to cost.  

Unfortunately, when obtaining a mortgage there is a slew of fees that the lender charges for initiating or writing up the loan. The fees start to add up and the borrower can pay thousands more than just the interest rate shown.  

Mortgage APR’s might include:

  • Interest Rate of the Loan
  • Origination Fees
  • Discount Points
  • Rebate Points
  • Other Fees, Etc.

Should you use interest rate or apr for calculating a mortgage?

Shopping around for a mortgage is important because rates do vary.

Also, because lenders can charge different additional fees, comparing interest rates alone would be misleading to the consumer. This is why comparing APRs is a more comprehensive way to figure out what your loan is going to cost you.

Two 30-year mortgages with identical interest rates of 4.0% could cost you different amounts due to the lender fees involved. The lender with the lower APR would be giving you a better deal in the long run.  

APR vs Interest Rate Summary

The difference between a mortgage interest rate vs APR is that the Annual Percentage Rate is a more comprehensive look at what a loan will cost the borrower. The APR includes the interest rate, origination fees, discount points, rebate points, and all other fees written into the loan. Looking solely at a mortgage’s interest rate will not give you the full picture of its cost and therefore the APR value is more useful.

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