APR Calculator — Compare Two Loan Offers
ℹ RefinanceUSA is not a lender. Results are estimates for comparison. Enter only lender fees (origination + points) — exclude third-party fees (appraisal, title) which are typically the same at all lenders. How we calculate
APR vs. Interest Rate: The Critical Difference
The interest rate determines your monthly payment. The APR tells you the true annual cost of the loan after factoring in lender fees. Two lenders can offer the same interest rate but have dramatically different APRs if their fees differ.
What APR Includes
- Interest rate (the largest component)
- Origination fees and loan processing fees
- Discount points paid to buy down the rate
- Mortgage broker fees (if applicable)
- Certain other finance charges required by the lender
What APR Does NOT Include
- Appraisal fees (third-party, similar at all lenders)
- Title insurance and settlement fees
- Recording fees and transfer taxes
- Prepaid interest, taxes, and insurance
- Private mortgage insurance (PMI) — though HELOC APR does include PMI
How APR Is Calculated
The APR is the effective monthly interest rate that, applied to the net loan proceeds (loan amount minus fees), produces the same payment stream as the stated rate applied to the full loan amount. It's the IRR of the loan's cash flows from the borrower's perspective.
3 APR Comparison Scenarios
Scenario 1 — Same rate, different fees: APR reveals the truth
$400K loan, 30 years — two lenders with identical rates
| Lender A: rate | 6.75%, $1,500 origination fee |
| Lender A: APR | 6.80% |
| Lender B: rate | 6.75%, $8,000 origination fee |
| Lender B: APR | 7.02% |
| Same monthly payment? | Yes — both $2,594/mo |
| Lifetime cost difference | Lender A saves $6,500 in fees paid |
| Recommendation | Lender A — identical rate, lower total cost |
When the stated rate is identical but fees differ, the APR immediately reveals which offer is better. Always request the Loan Estimate from multiple lenders and compare APR — not just the headline rate.
Scenario 2 — Lower rate with points vs. no-points loan
$350K loan — should you pay 2 points for a lower rate?
| Loan A: rate (no points) | 7.00%, $0 in points |
| Loan A: APR | 7.00% |
| Loan A: monthly payment | $2,329/mo |
| Loan B: rate (2 points) | 6.50%, $7,000 in points |
| Loan B: APR | 6.74% |
| Loan B: monthly payment | $2,212/mo |
| Monthly savings with Loan B | $117/mo |
| Break-even on points cost | 60 months (5 years) |
| Recommendation | Loan B if staying 5+ years; Loan A if shorter |
APR captures the point cost — Loan B's 6.74% APR vs. 7.00% for Loan A tells you it's a better deal over the full term. But if you sell in 3 years, Loan A (no points) saves money despite the higher APR. APR is a lifetime metric; match it to your actual hold period.
Scenario 3 — The misleading advertised rate
$450K loan — advertised rate hides high fees
| Advertised bank rate | 6.25% (front-page offer) |
| Required origination fee | $13,500 (3% of loan) |
| True APR on advertised loan | 6.68% |
| Online lender rate | 6.50% (no origination fee) |
| True APR on online lender | 6.51% |
| Better deal? | Online lender at 6.50% / 6.51% APR |
| Lifetime savings choosing online lender | $13,500+ (in fees not paid) |
The advertised 6.25% rate looks far better than 6.50% — but the high origination fee makes the APR 6.68%. The "higher" 6.50% no-fee loan has a lower APR of 6.51% and saves $13,500+ in upfront costs. This is exactly why the CFPB requires lenders to disclose APR on all loan disclosures.
Frequently Asked Questions
What is APR on a mortgage?
APR is the true annual cost of a mortgage including both the interest rate and most lender fees. A 6.75% rate with $3,500 in fees on a $350,000 loan has an APR of approximately 6.87% — higher than the stated rate because the fees are factored in as additional financing cost.
What's the difference between APR and interest rate?
The interest rate drives your monthly payment calculation. APR adds lender fees to the cost picture. Two loans with the same interest rate but different fees will have different APRs — the one with more fees has a higher APR and costs more over the loan's life.
What fees are included in APR?
APR includes lender-controlled fees: origination fee, discount points, mortgage broker fees, and required finance charges. It excludes third-party fees (appraisal, title, recording) that are roughly the same regardless of lender.
When should I use APR vs. total cost comparison?
APR is best for comparing loans you plan to hold for the full term. For shorter holds (5–7 years), compare total out-of-pocket cost over your expected tenure — a loan with lower fees but higher APR may cost less than a lower-APR loan loaded with upfront fees if you sell or refinance early.
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Get the Full Picture on Your Refinance
The RefinanceUSA calculator lets you enter complete loan offers — rate, fees, term, and closing costs — and compare them side by side across monthly savings, break-even, and lifetime cost.
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