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Interest Rates

Difference between a mortgage interest rate and an APR

written by Loan Smart Team Smart Team August 26, 2016
Difference between a mortgage interest rate and an APR

What is the difference between a mortgage interest rate and an APR?

According to the Consumer Financial Protection Bureau (CFPB), the difference between a mortgage interest rate and an annual percentage rate is that a mortgage interest rate is the cost you pay each year to borrow money for a mortgage. An annual percentage rate reflects the mortgage interest rate and other charges.

There are many costs associated with taking out a mortgage. These include:

  • The interest rate
  • Points
  • Fees
  • Other charges

The interest rate is the cost you will pay each year to borrow the money, expressed as a percentage rate. It does not reflect fees or any other charges you may have to pay for the loan.

An annual percentage rate (APR) is a broader measure of the cost to you of borrowing money. The APR reflects not only the interest rate but also the points, mortgage broker fees, and other charges that you have to pay to get the loan. For that reason, your APR is usually higher than your interest rate.

Source: CFPB

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