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.

Tip: Take care when comparing the APRs of adjustable-rate loans. For adjustable rate loans, the APR does not reflect the maximum interest rate of the loan. Be careful when comparing the APRs of fixed-rate loans with adjustable-rate loans, or among different adjustable-rate loans. Don’t look at the APR alone in determining what loan makes the most sense for your circumstances.