Mortgage glossary
Annual percentage rate (APR)
Definition: The annual percentage rate (APR) is the yearly cost of a loan expressed as a percentage, combining the interest rate with certain lender fees and charges so offers can be compared.
APR is required by federal Truth in Lending rules and appears on the Loan Estimate and Closing Disclosure. Because it folds in costs such as origination charges, discount points and mortgage insurance, the APR is typically higher than the note rate.
APR is most useful for comparing two offers on the same loan type and term. It assumes the loan is kept to maturity, so it can overstate the effect of upfront fees for someone who expects to sell or refinance within a few years. Compare APR alongside the rate, total closing costs, and the cash needed to close.
Related terms
Reviewed by Kyle Richardson, NMLS #863464. General information, not advice for your specific situation. All glossary terms
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