Annual Percentage Rate (APR)
A blended figure that combines the note rate with most upfront loan costs to express the true yearly cost of borrowing.
APR is a regulatory disclosure designed to help borrowers compare loans on equal footing. It captures the interest rate plus the financing-related charges the lender either collects directly or builds into the deal, discount points, origination fees, mortgage insurance premiums, and certain third-party costs the lender requires.
Because APR includes those upfront costs amortized over the full loan term, it almost always reads higher than the note rate. A loan with a low quoted rate but heavy points may carry an APR meaningfully above its rate, while a no-point loan from the same lender will show APR much closer to its note rate.
APR is most useful when you're comparing two loans you'd realistically keep to maturity. If you expect to refinance or sell within a few years, the upfront costs dominate the math and you should compare total dollars paid in your actual holding period rather than relying on APR alone.
Related terms
Other terms you'll see alongside Annual Percentage Rate
The percentage of the loan balance the lender charges as the cost of borrowing, paid annually but accrued daily.
Prepaid interest paid at closing to permanently lower the loan's interest rate.
The lender's charge for processing the loan application and underwriting the file, expressed as a percentage of the loan amount or a flat dollar amount.
The standardized three-page disclosure a lender must provide within three business days of a complete loan application.
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