APR

APR (Annual Percentage Rate) is the yearly interest rate on a loan, expressed as a percentage. In US consumer finance, the APR is required by Regulation Z (the Truth in Lending Act, 1968) to include certain mandatory fees on top of the stated interest rate — origination fees, discount points, and mortgage insurance, but not closing costs paid to third parties.

APR is distinct from APY (Annual Percentage Yield), which accounts for compounding. A 6% APR compounded monthly is roughly 6.17% APY. APR is the convention for loans (where the borrower wants to understate the effective rate); APY is the convention for savings (where the bank wants to overstate it).

Mortgage shopping in the US: lenders are required to quote APR alongside the nominal rate. The APR difference reveals the fee load. A 6.5% nominal / 7.0% APR loan has substantial upfront fees; a 6.5% nominal / 6.55% APR loan has minimal fees. Compare APRs, not nominal rates.

Use our mortgage calculator with the APR rather than the nominal rate if you want a true monthly-payment estimate including fees.