APR Calculator

APR is the rate that makes the present value of every payment equal the money you actually received - the loan amount less points and lender fees. There is no formula that solves it directly, so it is found by search. The interest rate sets your payment; the APR only tells you what the loan really costs.

What is the difference between interest rate and APR?

The interest rate sets your monthly payment. The APR takes that rate and folds in the points and lender fees, expressing the whole cost as one yearly rate. Two loans at 6.25 percent can have very different APRs, and the one with the higher APR is the more expensive loan.

Which should I compare offers on?

APR, but with a caveat. APR assumes you keep the loan for its full term. If you expect to sell or refinance in five years, a loan with low fees and a slightly higher rate usually wins even though its APR looks worse. Use the payoff field above to check.

What is a point?

One percent of the loan amount, paid at closing to buy a lower rate - typically around a quarter point off for each point paid. On a 300,000 dollar loan, one point is 3,000 dollars. It only pays off if you keep the loan long enough for the smaller payment to recover it.

Which fees go into APR?

Lender charges: origination, underwriting, processing, points and mortgage insurance. Third-party costs you would pay regardless - appraisal, title insurance, recording, prepaid taxes - generally do not. This is why APR is comparable between lenders but is not your total closing cost.

Why is my APR the same as my rate?

Because there are no fees in the figures entered. A genuinely zero-fee loan has an APR equal to its rate. If a lender quotes an APR identical to the rate, ask what they are charging and where it went.

Does a credit card APR work the same way?

No. A card APR is the plain yearly rate with no fees folded in, and cards compound daily, so the real cost is a little above the stated APR. Card APRs are also usually variable, tied to the prime rate.