Transparent method
The formula
Worked example
Example inputs
How to interpret the result
Comparing two Loan Estimates by their headline interest rate alone misses real cost differences, because different lenders fold different fees into their APR calculation. The APR figure only becomes genuinely comparable across lenders when the loan amount and rate-lock period behind each quote actually match.
Before you rely on it
What to check
Confirm both Loan Estimates use the same loan amount and the same rate-lock period before comparing their APR figures against each other.
The common error
Where people go wrong with mortgage APR calculator
Comparing two lenders' APR figures without checking that both quotes use the same loan amount and lock period. A shorter lock or a different loan amount can shift APR in ways that have nothing to do with which lender is actually cheaper.
Sensitivity evidence
How note interest rate changes the estimated mortgage APR
| Note interest rate | Estimated mortgage APR | Monthly principal and interest | Total scheduled interest |
|---|---|---|---|
| 4.3% | 4.4% | $1,722 | $269,844 |
| 5.3% | 5.4% | $1,933 | $345,777 |
| 6.3%worked example | 6.4% | $2,155 | $425,804 |
| 7.3% | 7.5% | $2,388 | $509,542 |
| 8.3% | 8.5% | $2,629 | $596,596 |
Every input, tested
Which input moves the estimated mortgage APR most
| Input | Tested from | To | Estimated mortgage APR at each end | Swing |
|---|---|---|---|---|
| Note interest rate | 5.3% | 7.3% | 5.4% to 7.5% | 2.0% (31%) |
| Loan term | 22.0 years | 38.0 years | 6.5% to 6.4% | 0.069% (1.1%) |
| Mortgage amount | $315,000 | $385,000 | 6.5% to 6.4% | 0.040% (0.6%) |
| APR-included finance charges | $6,300 | $7,700 | 6.4% to 6.5% | 0.039% (0.6%) |
Two variables at once
Estimated mortgage APR by note interest rate and mortgage amount
| Note interest rate \ Mortgage amount | $280,000 | $350,000 | $420,000 |
|---|---|---|---|
| 4.3% | 4.5% | 4.4% | 4.4% |
| 5.3% | 5.5% | 5.4% | 5.4% |
| 6.3% | 6.5% | 6.4% | 6.4% |
| 7.3% | 7.5% | 7.5% | 7.4% |
| 8.3% | 8.5% | 8.5% | 8.4% |
Step by step
The worked example, input by input
| Input | Value used |
|---|---|
| Mortgage amount | $350,000 |
| Note interest rate | 6.3% |
| Loan term | 30.0 years |
| APR-included finance charges | $7,000 |
| Estimated mortgage APR | 6.4% |
| Monthly principal and interest | $2,155 |
| Total scheduled interest | $425,804 |
Where the inputs come from
Enter the mortgage amount, the note rate and the term. APR-included finance charges are the fees that the Truth in Lending rules count, such as origination fees, discount points, mortgage insurance premiums paid up front and some settlement charges. Appraisal, title insurance and recording fees are typically excluded. The Loan Estimate lists the APR, so use it to check this estimate.
Using the estimated mortgage APR in a real decision
Look at the fee total and the payment as well.
When the result stops applying
For adjustable-rate mortgages the disclosed APR is based on assumptions about future rates. The APR does not capture escrow, taxes or insurance. Lenders may calculate it slightly differently within regulatory tolerance, so the disclosed figure can differ from this estimate by a few hundredths of a percent.
What to compare it with
Ask each lender for the Loan Estimate and compare the APR on page three along with the fees. The APR helps with fee differences, and the total interest percentage on the same page shows lifetime cost. If you plan to hold the loan a short time, favor lower fees. If you will hold it long, favor a lower rate. The mortgage points calculator prices the trade between fees and rate directly.
People also ask
Frequently asked questions
Why is my mortgage APR higher than the rate?
The APR folds upfront finance charges such as origination fees and points into the yearly cost of the loan, so it sits above the note rate. On the example, $7,000 of charges lifts the rate from 6.25% to about 6.44%.
Which fees are in the APR?
Finance charges such as origination, points and mortgage insurance premiums. Many third-party fees like title and appraisal are excluded.
Should I compare loans by APR or rate?
Use both. The rate determines your monthly payment, while the APR shows how fees change the cost across the whole term. If you may sell or refinance within a few years, weigh the fees more heavily than the APR suggests.