The lower the interest rate, the less you will pay for the total loan. The interest is expressed as a percentage rate. You will also see listed an APR (annual percentage rate) which includes the interest rate along with any fees, and in the case of a mortgage, includes points and closing costs.
Interest Rate vs. APR for a Mortgage The APR for a mortgage includes the annual cost of interest plus fees charged at closing. While most lenders charge a few of the same closing costs, like credit report and property appraisal fees, payment structures can vary widely from lender to lender.
The Annual Percentage Rate (APR) is 4.495%. After the initial 5 years, the principal and interest payment is $1,030.56. The fully indexed rate of 4.25% is in effect for the remaining 25 years and can change once every year for the remaining life of the loan.
Annual Percentage Rate, or APR, refers to the total cost of borrowing, as the calculation for APR includes not only the interest rate, but also many other fees the borrower might be charged. So APR is seen as the "effective interest rate," a way for borrowers to compare one loan to another (even if it has some pitfalls ).
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Determining whether you want a fixed or variable rate mortgage will also affect the choice between interest rates and APR, since the APR that lenders display for ARM loans can change when the interest rate starts to adjust later in the term.
To put it simply, a loan with a 4 percent interest rate will have a lower monthly payment than a loan with a 5 percent interest rate (assuming the terms of both loans are identical). The same goes for an APR.
The annual percentage rate (APR) is the amount of interest on your total mortgage loan amount that you’ll pay annually (averaged over the full term of the loan). A lower APR could translate to lower monthly mortgage payments.
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Your note rate is what determines your principal and interest mortgage payment. and re-calculates the figure over the loan term, thus the APR rate disclosure is higher. This rate vs. APR.