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APR is the true cost of your mortgage — the note rate plus fees, points, and origination costs baked in. Use it to compare loan offers apples-to-apples.
We compute your scheduled monthly P&I on the full loan at the note rate, then solve numerically (bisection) for the interest rate that produces the same payment on the net proceeds — loan minus points, origination, and other prepaid finance charges. That solved rate is your APR.
Interest rate is what accrues on the balance. APR is the rate that would produce the same monthly P&I if you had borrowed the loan minus your upfront fees. It's a cost-of-borrowing measure.
Usually — but only if you'll hold the loan long enough to amortize the fees. If you might refinance or sell within a few years, the note rate matters more.
Finance charges required by the lender: origination, discount points, mortgage insurance, and certain closing fees. Not owner's title, taxes, or optional prepaids.
APR spreads fees over the loan, so it adds cost on top of the note rate. If APR equals the rate, there are essentially no fees (rare).
No — federal law standardizes what's included, but lenders vary in which specific fees they classify as finance charges. Always read the Loan Estimate closely.
Results are estimates for educational purposes only and are not financial advice. Verify with a qualified professional before making decisions.
Last updated October 2026