Mortgage APR Calculator

Calculate the effective Annual Percentage Rate of your mortgage including origination fees, discount points, and other closing costs. Compare the true cost to the stated interest rate.

Mortgage Details

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yrs
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Enter your mortgage details and click "Calculate" to find the effective APR.

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Pro Tip

When shopping for mortgages, request a Loan Estimate from at least 3 lenders on the same day. This ensures you are comparing current rates and fees apples-to-apples. The Loan Estimate is a standardized form that makes comparison easy.

Try the Closing Cost Estimator →

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Understanding Mortgage APR

The mortgage APR (Annual Percentage Rate) reflects the true cost of your mortgage by factoring in not just the interest rate, but also the origination fees, discount points, and other costs that are part of obtaining the loan. This makes APR the most reliable way to compare mortgage offers from different lenders.

Discount points are upfront fees paid to the lender in exchange for a lower interest rate. One point equals 1% of the loan amount and typically reduces the rate by 0.25%. Whether paying points makes sense depends on how long you plan to keep the loan -- the longer you stay, the more you benefit from the lower rate.

The Truth in Lending Act requires lenders to disclose the APR on mortgage loan estimates. However, different lenders may include different fees in their APR calculations, so it is important to compare the itemized costs as well. The Loan Estimate form provides standardized disclosure.

Keep in mind that APR assumes you keep the loan for its full term. If you refinance or sell before then, the effective rate will be higher because the upfront costs are spread over fewer payments. For shorter holding periods, a loan with lower fees but a slightly higher rate may be more cost-effective.

Mortgage APR Calculation

Solve for APR: Loan − Fees = M × [(1+r)n − 1] / [r × (1+r)n]

Where:

M = Monthly mortgage payment

r = Monthly APR rate (to be solved)

n = Total monthly payments

Fees = Origination fee + discount points + other fees

Example

$300,000 loan at 6.75% with $7,000 total fees for 30 years:

  • • Monthly payment: $1,945.79
  • • Effective loan: $300,000 - $7,000 = $293,000
  • • Solve for APR iteratively: ~6.96%
  • • APR is 0.21% higher than stated 6.75% rate
  • • Total cost over 30 years: $707,484 (including fees)

Frequently Asked Questions

What is included in mortgage APR?
Mortgage APR typically includes the interest rate, origination fees, discount points, mortgage broker fees, and certain closing costs. It generally excludes title insurance, appraisal fees, and escrow deposits, though this can vary by lender.
Should I pay discount points?
Points make sense if you plan to keep the loan long-term. Calculate the break-even: divide the cost of points by the monthly savings. If you plan to stay past the break-even period, points save you money.
Why are APRs different between lenders for the same rate?
Different lenders charge different fees. One lender may offer a lower rate but charge higher origination fees, while another offers a higher rate with minimal fees. APR helps you compare the true cost, though it is not perfect.
Is a lower APR always the best choice?
Not always. If you plan to sell or refinance within 5-7 years, a loan with a higher APR but lower upfront fees may save you money overall. APR is most useful for comparing loans you plan to keep for the full term.