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Mortgage APR Calculator

Calculate the true Annual Percentage Rate (APR) of your mortgage including all fees. Compare loan offers to find the best deal for your situation.

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APR vs Interest Rate: APR includes fees, so it's always higher than the interest rate

A 6.5% rate with 2 points and $5,000 fees ≈ 6.72% APR on a $400K loan

🏠 Loan Details

💰 Fees & Costs

Typically 0.5% - 1% of loan amount

Each point = 1% of loan, reduces rate by ~0.25%

📊 APR Results

Annual Percentage Rate (APR)

6.671%

Interest Rate6.500%
APR (with fees)6.671%

⚠️ Fees add 0.171% to your effective rate

Monthly Payment$2,528
Total Interest (30 years)$510,178
Total Fees at Closing$7,000
Total Cost of Loan$917,178

🏦 Understanding Mortgage APR

The Annual Percentage Rate (APR) is a standardized way to express the true cost of a mortgage loan. Unlike the simple interest rate, APR includes fees and costs associated with the loan, giving you a more complete picture of what you'll actually pay.

Why APR Matters

The Truth in Lending Act (TILA) requires lenders to disclose the APR so consumers can compare loan offers on an apples-to-apples basis. A loan with a lower interest rate might actually cost more if it has higher fees - and APR reveals this.

📊 Example Comparison

Loan A: 6.5% rate + 2 points + $5,000 fees = 6.72% APR
Loan B: 6.875% rate + 0 points + $2,000 fees = 6.95% APR

Loan A has lower APR but requires $11,000 upfront vs $2,000 for Loan B.

When to Pay Points

Buying discount points makes sense if you plan to keep the loan long enough to recoup the upfront cost through lower monthly payments. Calculate your break-even point: divide the point cost by monthly savings. If you'll own the home longer than that, points may be worth it.

📋 Quick Reference

• 1 point = 1% of loan amount

• 1 point ≈ 0.25% rate reduction

• APR > Interest Rate (always)

• Avg closing costs: 2-5%

• Avg homeowner stays: 8 years

⚠️ Important Note

This calculator provides estimates for educational purposes. Actual APR may vary based on lender calculations and specific loan terms. Always review the official Loan Estimate document from your lender.

Frequently Asked Questions

APR is calculated by finding the interest rate that would produce the same monthly payment if all fees were rolled into the loan. The formula considers: loan amount, interest rate, loan term, origination fees, discount points, and closing costs. Our calculator uses the standard APR calculation method required by the Truth in Lending Act (TILA).

The interest rate is simply the cost of borrowing the principal amount. APR (Annual Percentage Rate) includes the interest rate PLUS fees like origination fees, discount points, and certain closing costs. APR is always higher than or equal to the interest rate. APR gives you a more accurate picture of the true cost of the loan.

Your APR is higher because it includes additional costs beyond just interest. These typically include: origination fees (0.5%-1% of loan), discount points (each point = 1% of loan), mortgage broker fees, and certain closing costs. The more fees you pay, the larger the gap between your interest rate and APR.

It depends on how long you plan to keep the loan. If you'll keep it for the full term (15-30 years), choose the lower APR. If you plan to sell or refinance within 5-7 years, compare the total 5-year costs instead. A loan with higher rate but lower fees might cost less if you don't keep it long enough to benefit from the lower rate.

Discount points are prepaid interest that lowers your rate. Each point costs 1% of the loan amount and typically reduces your rate by 0.25%. Buy points if: you'll keep the loan long enough to break even (usually 4-7 years), you have extra cash at closing, and you want lower monthly payments. Don't buy points if you might sell or refinance soon.

APR includes: origination fees, discount points, mortgage broker fees, and certain prepaid finance charges. APR does NOT include: title insurance, appraisal fees, credit report fees, attorney fees, recording fees, or property taxes. This is why APR alone shouldn't be your only comparison tool.

⚠️ Disclaimer: This calculator provides estimates for informational and educational purposes only. It is not financial advice. APR calculations are approximations and may differ from actual lender calculations. Always consult with a qualified mortgage professional and review official loan documents before making financial decisions.