What is a mortgage APR?
APR (Annual Percentage Rate) represents the true cost of a mortgage, including not just the interest rate but also lender fees, points, and certain finance charges. It allows borrowers to compare loan offers more accurately.
How is APR different from the interest rate?
The interest rate only reflects the cost of borrowing the principal. The APR includes lender and finance fees, showing the real yearly cost of the loan. APR is almost always higher than the note rate.
Why does my APR increase when I add lender fees?
When lender fees are added, the effective loan amount is reduced, but your monthly payment stays the same. This makes the loan more expensive over time, increasing the APR.
What fees are included in mortgage APR calculations?
APR typically includes:
- Origination fees
- Underwriting fees
- Discount points
- Processing and lender charges
Third-party costs like property taxes, homeowners insurance, and escrow deposits are usually not included.
FAQs
How accurate is this mortgage APR calculator?
This calculator provides a close APR estimate based on standard federal APR formulas. Final APR figures may vary slightly depending on lender-specific fee structures and closing disclosures.
Can I use APR to compare different loan offers?
Yes. APR is one of the best tools for comparing mortgages with different rates and fee structures. A lower APR generally indicates a more cost-effective loan over time.
Does a lower APR always mean a better mortgage?
Not always. A lower APR often assumes you keep the loan for its full term. If you plan to refinance or sell early, a loan with higher APR but lower upfront costs may be better.
How does loan term affect APR?
Longer loan terms typically result in lower monthly payments but higher total interest, which can affect APR. Shorter terms often show lower APRs due to reduced interest exposure.
Is APR required by law?
Yes. In the U.S., lenders are required under the Truth in Lending Act (TILA) to disclose APR so borrowers can compare loans transparently.
Does this calculator work for FHA, VA, and conventional loans?
Yes. The calculator works for any mortgage type, as long as you enter the correct loan amount, interest rate, term, and lender fees.
Can I download an APR report?
Yes. After calculating, you can download a branded PDF report showing:
– Monthly payment
– Note rate vs APR
– Total finance charges
– Amortization details
This is useful for lender comparisons or personal record-keeping.
Who should use a mortgage APR calculator?
This tool is ideal for:
– First-time homebuyers
– Refinancing homeowners
– Borrowers comparing lender offers
– Anyone reviewing loan estimates
Is this calculator free to use?
Yes. HomeExpertly’s Mortgage APR Calculator is 100% free and available without registration.