What is the difference between annual interest rate and apr

Since the lender servicing costs included in the APR are spread out across the entire life of the loan, sometimes as long as 30 years, refinancing or selling your home may make your mortgage more expensive than originally suggested by the APR. Another limitation is the APR's lack of effectiveness in capturing the true costs of an adjustable-rate mortgage since it is impossible to predict the future direction of interest rates. While the interest rate determines the cost of borrowing money, the APR is a more accurate picture of total borrowing cost because it takes into consideration other costs associated with procuring a loan, particularly a mortgage.

When determining which loan provider to borrow money from, it is crucial to pay attention to the APR, meaning the real cost of financing. Office of the Comptroller of the Currency. Federal Reserve Bank of St. Board of Governors of the Federal Reserve System. Actively scan device characteristics for identification. Use precise geolocation data. Select personalised content. Create a personalised content profile. Measure ad performance. Select basic ads. Create a personalised ads profile. Select personalised ads.

Apply market research to generate audience insights. Measure content performance. So evaluate carefully when you look at the rates lenders offer you. Ready to prequalify or apply? Get started. Understanding your mortgage options. Refinancing to lower your monthly mortgage payment.

Read more refinance articles ». Read more mortgage articles ». Ready to find out what your monthly payment might look like? Suzanne De Vita. Suzanne De Vita is the mortgage editor for Bankrate, focusing on mortgage and real estate topics for homebuyers, homeowners, investors and renters. Reviewed By Casey Fleming. Reviewed by. Casey Fleming. Casey Fleming is an expert who helps clients understand how the mortgage industry and loan products work, and how to get the best mortgage for their specific needs.

Share this page. Bankrate Logo Why you can trust Bankrate. Bankrate Logo Editorial Integrity. Key Principles We value your trust. Bankrate Logo Insurance Disclosure. What is APR? Read more From David. About our review board. You may also like Mortgage rates crush it again, plunge to a new all-time low. Unpaid federal workers can sidestep rules to apply for cash-out mortgage refinance. How a mortgage broker can save you time and money.

Rates expected to jump on Fed Day. Compare refinance rates. Source: Bankrate mortgage APR calculator. And you can learn more about credit card APRs by checking out this deep dive into how credit card APRs are calculated. For credit cards, interest rate and APR can be used interchangeably when comparing offers. But pay attention to whether the rate is variable or non-variable, since a variable rate can change.

When it comes to mortgages and other types of loans, comparing APRs may be the most helpful, since APRs include not only the interest but other costs too. When comparing loan offers, it also helps to compare other factors—not just the interest rates or the APRs. Some factors to consider include things like the annual fees, required down payments and loan terms.

Remember: Interest rate and APR both represent the cost of borrowing money. For credit cards, the interest rate and the APR are usually the same. But when it comes to other loans, the APR can more accurately reflect the cost of borrowing, since it includes the interest rate as well as some other costs. Government and private relief efforts vary by location and may have changed since this article was published. Consult a financial adviser or the relevant government agencies and private lenders for the most current information.