What Is The Difference Between The Interest Rate And The APR Of A Mortgage?

Published On: May 20, 2019|Categories: Jasper IN Real Estate|Tags: APR, broker fees, discount points, interest rate plus, interest rates, private mortgage insurance (PMI)|

Have you ever checked out the interest rates chart for mortgages and wondered, “What’s the difference between the interest rate and the APR?” Why are there two different rates? How is that possible? It’s a common thing to wonder about when you first start looking at rates for mortgages. Here’s a simple explanation.

APR

APR, or annual percentage rate, is the cost to borrow money for the purchase of your home expressed as a yearly percentage rate. This rate doesn’t include home equity lines of credit and it does include other charges or fees. When you have a home equity line of credit, the APR is shown as the interest rate. With a mortgage, the APR shows the interest rate plus, broker fees, discount points, private mortgage insurance (PMI), and some closing costs. The APR is actually a more real-world figure for indicating your true borrowing costs than current interest rates alone.

Interest Rate

The interest rate is the cost that a borrower will pay to the lender for borrowing money over a period of time. It’s not including other charges or fees. So, for regular mortgages, the interest rate itself doesn’t include other charges or fees.

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