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What is the difference between the interest rate and the APR?

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What is the difference between the interest rate and the APR?

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A. The interest rate is the rate at which you repay the mortgage loan. It determines the principal and interest component of your monthly mortgage payment. The APR is the actual cost of borrowing in the form of an annual percentage rate. It includes the interest rate, points, mortgage insurance, and other finance charges associated with the loan. Because of these charges, the APR is often higher than the interest rate. Simply stated, if there were no costs associated with obtaining your loan, then the interest rate and the APR would be the same.

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The interest rate is the cost to borrow the money. The APR represents the total cost of the mortgage over the life of the loan, including closing costs and lender points.

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