APR Calculator

APR vs. note rate — a worked example

$200,000 mortgage, 30 years, 6.00% note rate:

• Monthly payment: $1,199.10
• Total interest over life: $231,677

Now add $4,000 in lender fees. The borrower receives $196,000 net but still pays $1,199.10 per month on a $200,000 face. The APR is the rate that makes $196,000 amortize to the same monthly payment — about 6.17%.

So a “6.00%” loan with $4,000 in fees is really a 6.17% loan in comparable terms. If another lender offers 6.10% with zero fees, that is the cheaper loan despite the higher nominal rate.

What’s included in APR (US)

Required by Regulation Z:

• Origination fee / processing fee
• Discount points
• Mortgage broker fee
• Upfront PMI premium
• Prepaid interest (odd-days interest)

Excluded:

• Appraisal (if not lender-required)
• Title search and insurance (if borrower’s choice of provider)
• Recording fees
• Property taxes and homeowners insurance (escrow items)

Different lenders include and exclude slightly differently, which is why the CFPB publishes a standard TRID closing disclosure to force apples-to-apples comparison.

APR vs. APY

On a savings account, APY is always higher than the nominal rate because interest compounds. On loans, APR is used because most loans amortize on a fixed monthly payment and compounding is implicit.

When APR under-represents cost

APR assumes you hold the loan to full term. If you sell or refinance in year 3 of a 30-year mortgage, you’ve paid the full $4,000 fee but only captured 3 years of the rate spread — your effective rate is much higher. Short expected holding period? Compare total cost over that horizon, not APR.