A loan costs more than its interest rate: lenders add fees and points on top. The annual percentage rate (APR) folds those charges into one yearly figure so two offers can be compared honestly. Use the general calculator for any loan, and the mortgage version below it for home loans.
PMI, if any, is counted until the balance reaches 78% of the home value (the automatic termination point).
The interest rate prices the principal and nothing else. The APR prices the loan: interest plus the lender fees, discount points and mortgage insurance you must pay to get it, annualized over the term. U.S. law (the Truth in Lending Act) forces lenders to disclose it precisely so offers can be compared side by side. Worked example, from the defaults above: a $100,000 loan advertised at 6% with $2,500 of upfront fees carries a real APR of 6.563% — the fees quietly added more than half a point. On the mortgage side, a 6.2% loan with $3,500 of fees and half a point comes out at 6.367%. When two lenders quote the same rate, the APR is where the difference hides.
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Typically inside the APR: origination and processing fees, underwriting, discount and origination points, mortgage broker fees, mortgage insurance, and some closing charges. Typically outside it: appraisal, survey and title fees, notary and recording charges, and the prepaid escrows for taxes and homeowner’s insurance (real costs, but not charges for credit). Because the boundary varies a little by lender, ask each lender for the itemized fee list behind their APR before deciding — the Loan Estimate you receive within three days of applying has exactly that breakdown.
APR spreads upfront fees across the entire term — 30 years of payments diluting a one-time charge. Pay the loan off early, as most borrowers do by selling or refinancing, and those same fees are in effect spread over far fewer years, so the effective cost is higher than the stated APR. The practical rule: if you expect to keep the loan a long time, chase the lowest APR; if you expect to move within a few years, weight low upfront fees more heavily than a tenth of a point of APR. Points make the same trade in miniature — each point (1% of the loan) buys a lower rate, and only pays for itself if you hold the loan past its own break-even, which our refinance calculator explores for existing loans.
A fixed APR stays put for the life of the loan; a variable APR rides an index (plus a margin based on your credit), so its disclosed figure is only the starting point. Do not confuse APR with APY either: APY is the deposit-side measure and includes compounding, which is why the same money looks bigger as APY. Ten percent APR compounded monthly equals 10.47% APY — banks advertise loans by APR (looks smaller) and savings by APY (looks bigger), and now you know why. For the loan itself, start with the full payment picture in our mortgage calculator.
The rate prices the principal only. APR annualizes interest plus fees, points and mortgage insurance — the total cost of credit — so it is higher and far better for comparing offers.
Closing costs. Origination fees, points and insurance are spread over the term and added to the rate. A low rate with heavy fees can produce a higher APR than a higher rate with light fees.
Only if you keep the loan to term. APR assumes you do; early payoff makes upfront fees matter more than the APR implies.
Disclaimer: This calculator provides estimates for educational purposes only and does not constitute financial advice. APR is computed under the standard actuarial method (the periodic rate that equates the payment stream to the amount financed net of prepaid fees). Official lender disclosures may differ slightly because of fee classification and tolerance rules.