The Difference Between APR and Interest Rates

Southwest Ohio Real Estate Podcast with Tami Holmes

APR and interest rates aren’t the same thing. Here’s how they’re different and what they measure.

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Knowing the difference between interest rates and annual percentage rates (APR) could save you thousands on your mortgage. Here's what you need to know.

Both of these rates measure important but different costs associated with your mortgage.

The interest rate is a measure of the cost of borrowing the principal loan amount and is expressed as a percentage, while the APR is a broader measure of your mortgage costs, including things like lender fees, discount points, and closing costs.

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The APR is a broader measure of your costs.

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The main difference between the two is that while the interest rate calculates your actual monthly payment, the APR calculates the total cost of your loan.

If you’re only focused on getting the lowest monthly payment, I would focus on the interest rate. However, if you’re more concerned with the total cost of your loan, using the APR as a tool to compare the costs of two different loans is smart.

If you have any questions or would like to get connected with a lender that I trust, reach out to me via phone or email today. I look forward to hearing from you soon.