What is the difference between the Annual Percentage Rate (APR) and the interest rate?
The rate reflected on the APR shows the cost of the credit as a yearly rate. This rate is generally higher than the rate stated on your mortgage note because, in addition to the interest rate, APR includes other costs such as origination fee, loan discount points, pre-paid interest, and mortgage insurance. The APR allows you to compare, in addition to the interest rate, the total cost of financing your loan, between various lenders. The interest rate, however, aka note rate, is the rate that your monthly payments are based on.
The rate reflected on the APR shows the cost of the credit as a yearly rate. This rate is generally higher than the rate stated on your mortgage note because, in addition to the interest rate, APR includes other costs such as origination fee, loan discount points, pre-paid interest, and mortgage insurance. The APR allows you to compare, in addition to the interest rate, the total cost of financing your loan, between various lenders. The interest rate, however, aka note rate, is the rate that your monthly payments are based on.
