Home shoppers who have begun looking into mortgages often wonder about the difference between interest rate and APR (Annual Percentage Rate). Basically, think of the interest rate as the starting point in what you will pay for a mortgage loan, then tack on associated fees to calculate the APR. To better understand these concepts, let’s begin with some definitions.
Key Takeaways:
- Home shoppers who have begun looking into mortgages often wonder about the difference between interest rate and APR.
- The APR is a calculated rate that not only includes the interest rate but also takes into account other lender fees required to finance the loan.
- To calculate the APR, the lender fees are incorporated into the interest rate.
“Basically, think of the interest rate as the starting point in what you will pay for a mortgage loan, then tack on associated fees to calculate the APR.”