What Is the Difference Between APR and Interest Rates?

A lot of people think that the APR is synonymous with interest rates, but understanding the distinction between the two will help you save time and money on your home mortgage.

While both terms measure costs associated with your home loan, they measure them differently. The interest rate is the cost of borrowing the principal loan amount and it can be variable or fixed. The APR, or annual percentage rate, is a much broader measure of the costs of your mortgage. It reflects the interest rates, but also the lender fees and some closing costs.

The main difference is that while the interest rate calculates the monthly payment, the APR calculates the entire cost of the loan.

If you’re interested in the lowest monthly fee, it’s better to focus on the interest rates. If you’re looking at the overall cost, the APR is your tool.

If you have questions about this or anything else related to real estate, feel free to reach out via phone or email today. We look forward to hearing from you soon.