What is the Difference Between Mortgage Rate and APR?

The main difference between a mortgage rate and an APR lies in the costs they represent. Here's a breakdown of the two:

• Mortgage Rate: This is the percentage of interest charged on the loan amount itself. It does not reflect any fees or other costs associated with the loan.
• Annual Percentage Rate (APR): This is a broader measure of the cost of borrowing money, as it includes the interest rate, points, mortgage broker fees, and other charges associated with the loan. The APR is usually higher than the interest rate because it takes into account additional fees.

In summary:

• The mortgage rate is the cost of borrowing the money, expressed as a percentage rate (interest).
• The APR is the annual cost of a loan to a borrower, including fees, also expressed as a percentage.

When comparing mortgage offers, it's essential to consider both the mortgage rate and the APR. The APR provides a more comprehensive picture of the true cost of the financing, making it easier to compare different loan offers. However, it's also important to consider other factors such as the size of your down payment, closing costs, and other fees associated with the loan.

Comparative Table: Mortgage Rate vs APR

The difference between mortgage rate and APR (Annual Percentage Rate) lies in what they represent. The mortgage rate, or interest rate, indicates the cost of borrowing the money for the mortgage, while the APR includes additional fees and charges associated with the loan. Here is a comparison table breaking down the differences:

The APR is a more comprehensive measure of the cost to borrow money, as it takes into account the interest rate, fees, and other charges associated with the mortgage. When comparing mortgage offers, it is essential to consider both the interest rate and the APR to understand the true cost of the loan. The interest rate is always lower than the APR.