The interest rate is the quoted rate of interest you will have on your mortgage and that is what you will pay every month on top of your principal payments. If you are in a fixed rate loan, this rate will never change over the life of the loan.

An APR or annual percentage rate is not an actual interest rate and it is not used to calculate your monthly payments. Instead, it is simply a figure used to compare two loans side by side. The APR includes all additional costs associated with the loan as part of the loan amount, so it gives you an overall picture of what the total financing charges are. When comparing two loans of the same interest rate and different APR’s, the loan with the lower APR will have less closing costs associated with that loan. The loan with the higher APR will be more expensive upfront.

The APR is not the only thing you should look at. There are many components of a loan which may be of greater importance than the APR alone depending on your situation. For example, a quoted loan may have a slightly higher APR than another loan, but it also may have a significantly lower PMI rate which would save you a lot of money over time.

2018-08-19T23:07:55+00:00