Difference Between Mortgage Rate and APR

The terms Mortgage Rate and APR may seem to be the same, but they are two different things.

Mortgage rates and APR are both used to determine how much you will pay for a certain amount of money loaned throughout the loan.

It is important to know the difference between the two before getting in loan financing.

Mortgage Rate vs APR

The main difference between mortgage rate and APR is that a mortgage rate is the interest rate for a loan amount while an APR (Annual Percentage Rate) is the interest rate on the mortgage loan and includes points, fees, and other additional costs. Thus the latter is more inclusive and higher than the former.

Mortgage Rate vs APR

A mortgage rate refers to the interest rate you pay on your mortgage. The mortgage rate is the interest rate used by lenders to calculate the interest to be paid by the borrower.

It is usually stated as an annualized percentage which means it is calculated every year and usually in percentages of the amount borrowed.

APR stands for the annual percentage rate. This is the annualized cost of borrowing money or another financing, expressed as a single percentage rate.

This rate is the total amount of interest that you pay, expressed as a single percentage rate, over the life of the financing.

Comparison Table Between Mortgage Rate and APR

Parameters of ComparisonMortgage RateAPR
Also CalledThe mortgage rate also refers to the interest rate.APR is the abbreviation or acronym for Annual Percentage Rate.
AmountThe mortgage rate is always lower than APR.APR tends to be higher than the mortgage rate.
FluctuationsThe mortgage rates are subjected to market fluctuations.APR is relatively more stable than mortgage rates.
Additional FeesThe mortgage rate does not give any information on any additional fees.APR usually includes the rates of fees such as broker’s fees, discount points, and so on.
InclusiveThe mortgage rate is a narrower aspect as it just gives you an account of interest built on an amount loaned.APR is a broader aspect and includes all aspects like prepaid interests and other additional fees.

What is Mortgage Rate?

The term mortgage rate is a way of describing the interest rate paid by a borrower to a lender, in the form of monthly payments, for the use of the lender’s money.

Most mortgage rates are variable, and they change monthly, depending on the prime rate or other indexes.

 The mortgage rate is a key component of the mortgage payment calculator. The loan amortization schedule will illustrate how the mortgage rate is a part of the original mortgage loan.

Interest rates vary depending on the borrower’s creditworthiness and the relationship between the two parties.

The rate varies depending on economic conditions, local market conditions, and the credit policy of the lender. Mortgage rates are announced publicly and usually vary based on floating rates, which represent the market.

Before opting for a loan, such rates can be compared online or at respective knowledge centers to find the lowest rates.

Your mortgage rate is determined by your credit score, your finances, and the current interest rate of the nation. It’s important to monitor the interest rate regularly to ensure you’re getting the best terms on your loan.

If your interest rate is too high, consider refinancing.

What APR?

APR is a term used to express how much money you’ll pay in interest each year if you take out a loan. It’s the interest rate you pay on your credit card statement. It’s also known as the annual percentage yield.

An Annual Percentage Rate is the rate of interest charged on loan over a year.

It is calculated as the amount of interest charged over the amount of the loan.

An Annual Percentage Rate is designed to give consumers an idea of what the overall cost of a loan is going to be after all the interest payments are made.

An Annual Percentage Rate is calculated for varying lengths of time and may be quoted on a nominal or effective basis.

The APR takes into account any fees, charges, and interest that were applied to your loan. This means, for example, that if someone borrows $100 and repays $110 in a year, they have had to pay $10 in interest.

The APR is always calculated using your original loan amount, not your repayments, so if you borrowed $100 for a year and pay back $110, you would have to pay back an extra $10 in interest, which would take your overall repayments to $120.

Main Differences Between Mortgage Rate and APR

  1. With mortgage rates, you’re also looking at how much the loan will cost you over time. With APR, you’re just looking at the interest rate that you’ll have to pay every month
  2. In comparison to the mortgage rates, average APR rates are usually higher than mortgage rates because they have more factors associated with them.
  3. APR is a good way to estimate how much you’ll pay for a loan over time, but mortgage rates are the most direct measure for loans.
  4. A mortgage rate is the actual costs that you are paying for the home or property, but they can fluctuate. APR do not.
  5. With mortgage rates, you’ll want to compare the costs of different lenders and interest rates so you can get the best deal. APRs cannot be compared as such as they are not released as publicly as mortgage rates.
Difference Between Mortgage Rate and APR


While it is important to know how much is your interest on a certain amount of money loaned, APR or Annual percentage rate gives you an exact idea of how much you have to pay back actually.

These terms are often used when a person requires home loans, purchase homes or refinance.

It is very important to know not only the interest rate while borrowing but also APR as it may be the determining factor if two lenders have the same interest same or have minute differences then the APR becomes the deciding factor of which of the two loans would be cheaper for the borrower.


  1. https://www.nber.org/papers/w20561
  2. https://www.jstor.org/stable/41948224
  3. https://search.proquest.com/openview/d33e26fb59184ce073a06c79e4e88af1/1?pq-origsite=gscholar&cbl=34822
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