The Difference Between Mortgage Rates and APR

Published on Feb 24, 2015
What’s the difference between a mortgage rate and an APR? It’s one of the most common questions we get at the Quicken Loans Zing Blog. Kevin Ruzylo, a senior training consultant, explains the finer points of mortgage rates and APRs. The mortgage rate is the percent that the mortgage lender charges you for borrowing their money. The APR, or annual percentage rate, is the percent you pay to borrow the money, annualized over the life of your loan and including all costs associated with the loan. Annualization means to convert something to an annual rate, even if it’s not originally something paid annually. For example, you pay $4,000 in closing costs and fees one time when you get a mortgage. That cost is then annualized into your APR by taking consideration how many payments you’ll make annually (12) and how many years you’ll make those payments (30, for example). Based on the number of payments, the closing cost are converted into a percentage that is added to your initial rate, which then gives you your APR. It’s a measure that a consumer can use to get a true idea of the cost of borrowing money. One thing to consider: Make sure you compare the same terms (such as 30-year to a 30-year, or 15-year to a 15-year) when comparing APRs. If you don’t, the numbers could vary widely and you wouldn’t be able to accurately understand the difference in overall costs. For more information go to or call 800-QUICKEN.

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