When searching for a mortgage, many homeowners might wonder: “What is APR?” Mortgage loans have interest rates, but also other costs - this is where the annual percentage rate (APR) comes into play.
But what exactly does APR mean, and why does it matter for mortgages? Here is a basic guide to help you understand this crucial aspect of a loan estimate:
What is APR?
APR, or annual percentage rate, represents the amount of interest you’ll pay on a loan yearly. It’s a term you’re likely to encounter in the financial world, as credit card companies and lenders are required to include APR in their advertisements.
APR in mortgage loans
With mortgages, the advertised APR may be different from the mortgage interest rate. This is because the APR includes other factors like lender fees, closing costs, mortgage points and private mortgage insurance along with the regular interest rate.
APR vs interest rate
One simple way to compare APR and mortgage interest rates is to consider APR to be the “overall cost” of borrowing money for your home. While your mortgage rate directly affects your monthly mortgage payments, the APR reflects the total annual cost of the mortgage.
For this reason, many experts recommend comparing APR when shopping for a loan. The Truth in Lending Act (TILA) requires both lenders and credit card companies to disclose the APR up front, which makes it simpler to compare. However, it’s important to check with each individual lender to find out which fees are included in their advertised APR.
Mortgage APR is important to understand along with the myriad other financial terms in the real estate world. The more you know about what goes into your potential loan payments, the better decision you can make on a mortgage.
About the Author
Cheryl Pendenza - Realtor®/Broker Associate
Bringing more than 30 years of experience to the table, Cheryl has a paralegal degree, banking background, and is a member of many professional, civic, and community organizations.
Qualified • Experienced • Skilled
"As a full-time REALTOR®, I am dedicated to providing my clients with a high level of service by building relationships, marketing, and negotiating on their behalf. As a homeowner, I realize how important homeownership is.
Cheryl brings warmth and compassion to her client relationships and referrals have become the backbone of her business. "I’m grateful for every referral and welcome the opportunity to help clients achieve their real estate goals.”
Cheryl Pendenza, Broker Associate affiliated with RE/MAX Andrew Realty Services since 1999 is a local businesswoman and formidable negotiator who can help you achieve your real estate goals. Supporting family, community and local business is important to Cheryl and she can often be found at one of the local restaurants, shops, or galleries.
