Interest Rate vs. APR - What’s the difference?

Interest Rate vs. APR: What’s the Difference?

Your mortgage interest rate and Annual Percentage Rate (APR) measure different things. Understanding both can help you compare loan offers.

The interest rate is the annual rate charged on your outstanding loan balance. It does not include loan fees.

The APR combines the interest rate with certain borrowing costs, such as points, mortgage broker fees, and other applicable finance charges. Mortgage insurance may also affect the APR. Your APR is usually higher than your interest rate.

APR does not include every closing cost or homeownership expense. Property taxes and homeowners insurance generally are not included.

How should you compare loan offers?

Compare loans with similar amounts, terms, and features. Review the APR alongside the interest rate, points, lender credits, closing costs, and monthly payment. How long you expect to keep the loan also matters.

Use extra care when comparing fixed-rate and adjustable-rate mortgages. An adjustable-rate mortgage’s APR does not show the maximum rate you could pay.

Where can you find these numbers?

On a standard Loan Estimate, the interest rate appears on page 1 under “Loan Terms.” The APR appears on page 3 under “Comparisons.”

Have questions? Platinum Advantage Mortgage can help you understand your options for buying or refinancing anywhere in Florida.

Call 407-341-4313 or email rjolley@platinumadm.com. Please do not submit Social Security numbers, account numbers, or financial documents through the general contact form. Contact us for secure document-submission instructions.