Mortgage APR Calculator

Mortgage APR Calculator

Getting a new mortgage can be confusing, with all the different rates and fees to consider. One important number to look at is the Annual Percentage Rate, or APR. This helpful calculator allows you to easily compare different mortgage offers by estimating the true cost of the loan.

What is APR?

APR stands for Annual Percentage Rate. It is designed to represent the total cost of a mortgage loan, including the interest rate, fees, and other charges. By law, lenders are required to disclose the APR when providing mortgage quotes, so you can easily compare offers^[1].

While interest rate shows the cost of borrowing the principal amount, APR gives you a complete picture. It includes not just interest but also points, broker fees, and other charges that you pay to get the loan. So while two loans may have the same interest rate, their APRs could be quite different based on the fees.

The math behind APR can seem complicated, but it’s based on multiplying the interest rate by the number of payment periods in a year. This converts the rate into a yearly number you can easily understand and compare^[5].

Why APR Matters

When you shop for a mortgage, you’ll probably see interest rates advertised prominently. But focusing only on interest rate can mask the true cost of a loan. APR provides the full story.

For example, Lender A offers a 30-year fixed mortgage at 5% interest. Lender B offers 4.5% interest on the same loan. Just looking at interest rates, Lender B seems like the better deal.

But let’s say Lender A has very low origination fees of $500, while Lender B charges $4,000 in fees. When you calculate the APRs, Lender A’s offer could end up being lower despite the higher rate. The APR captures those hidden costs.

The bottom line is that APR gives you a standardized way to compare the total cost of loans. Focusing only on interest rates can lead you to make a more expensive choice^[2].

How to Use a Mortgage APR Calculator

Fortunately, you don’t have to do all the math yourself. Our handy calculator makes it easy to compare mortgage offers.

First, gather the key details for each loan:

• Loan amount
• Interest rate
• Loan term (e.g. 15 or 30 years)
• Origination fees
• Discount points

Then simply enter those numbers for each loan into our calculator. It will automatically compute the APR. Make sure to use the same loan amount and term for an apples-to-apples comparison.

Our calculator also shows the total interest paid over the life of the loan using the APR. This allows you to see not just yearly costs, but the total amount you’ll pay in interest with each option.

Once you have the APRs, you can easily see which lender is offering the lowest true cost. Our side-by-side comparison tool makes it simple.

Tips for Using an APR Calculator

Here are some tips to make the most of a mortgage APR calculator:

• Get fee estimates from lenders in writing before using the calculator. Verbal quotes may not include all costs.
• Enter the actual loan amount you need, not a sample amount.
• Use the same loan term for all quotes – 15 years, 30 years, etc.
• Double check your numbers. Data entry errors could significantly impact APR.
• Look at both APR and total interest paid. Higher APR doesn’t always mean higher total cost.
• Consider getting multiple quotes. More data points can help identify the best deal.

Taking the time to compute APR can save you thousands over the life of your mortgage. Our calculator makes it fast and easy to compare real costs.

So next time you’re shopping for a home loan, be sure to look past just the interest rate. Calculate the APR to find the most affordable option.

References

[1] https://lcef.org/calculators/MortgageApr.html

[2] https://www.nerdwallet.com/article/mortgages/mortgage-apr-calculator

[3] https://www.quickenloans.com/learn/apr

[4] https://www.bankrate.com/mortgages/mortgage-apr-calculator/

[5] https://www.lendingtree.com/personal/apr-vs-interest-rate/