Definition
The annual percentage rate, or APR, is the total cost of borrowing money. It includes the interest rate plus any additional lender fees, giving you a more complete picture of the loan’s cost.
Understanding APR in Mortgages
APR shows up when comparing mortgage offers. It combines interest rates and certain fees into a single percentage, making it easier to compare costs. Think of it as the yearly cost of borrowing. Example: With a $100,000 loan and a 4% interest rate, if fees add up to $1,000, the APR might be around 4.1%. It's not just the interest rate; it includes other costs too. A common misconception is that APR only affects your monthly payment. It actually reflects the true cost of the loan over time, helping you see the bigger financial picture.
