How Is Mortgage APR Calculated?
What is APR? The APR on a mortgage loan is the Annual Percentage Rate. The APR does not affect the monthly payment, which is calculated using the principal, interest rate and length of loan. The APR always includes discount points, origination points, pre-paid interest, private mortgage insurance, underwriting fees, loan-processing fees and document preparation fees. The APR may include the loan application fee and credit life insurance. Mortgage APR is designed to prevent lenders from offering low interest rates and hidden fees. How is APR Calculated As mortgage APR may include the loan application fee and/or credit life insurance fees, there is no clear way to calculate APR. In fact, different lenders use different formulas. In general, the APR can be calculated by adding the interest rate plus any additional costs. If two loans have the same interest rate, but one has a lower APR, the one with the lower APR is the better deal. APR calculators are available online at many sites, incl
