What are rates, terms, and APR?
All mortgages have an interest rate, a term, and an annual percentage rate (APR). For example, a mortgage might be defined as a 30-year fixed-rate loan at 7.625 percent, with an APR of 7.800 percent. In this example, the mortgage term is 30 years. As the borrower, you will pay back the loan in installments over the course of 30 years. The interest rate in this example is 7.625 percent. This means you must pay interest on the money you’ve borrowed at a rate of 7.625 percent per year. That is, in addition to paying back the loan, you will pay your lender an additional 7.625 percent of the current loan balance every year. This interest is basically the fee your lender charges you in return for lending you the money. The annual percentage rate (APR) is a measure of the cost of credit, expressed as a yearly rate. Because APR includes points and other costs such as origination fees, it’s usually higher than the advertised rate. The APR allows you to compare different mortgages based on actua
