Mortgage APR Calculator
Your quoted rate isn't the full story — points and lender fees push your real annual cost higher. See the true APR.
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True APR
6.84%
vs. 6.75% nominal (note) rate
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Last updated: August 17, 2026 · Reviewed by the DoCalc team
APR vs. Interest Rate: What's the Difference?
The interest rate (sometimes called the "note rate") is what your monthly principal & interest payment is actually calculated from. APR is a different, higher number required by federal Truth in Lending disclosures — it spreads points, origination fees, and certain other closing costs across the loan term and expresses the whole package as a single annualized rate, so it reflects the loan's true cost more completely than the rate alone.
This distinction matters most when comparing offers from different lenders: a lower rate with high fees can have a higher APR — and a higher real cost — than a slightly higher rate with low fees.
The Formula
There's no closed-form algebra solution for APR — it's solved iteratively (the same numerical method lenders' own disclosures use under Regulation Z): find the monthly rate that, when used to discount your actual fixed payment back to present value, equals the amount you really received after fees (not the full loan amount).
Worked Example
A $320,000 loan at 6.75% with $3,000 in lender fees and no points produces a $2,076/mo payment. Since the fees mean you only effectively received $317,000 to spend on the home, but you're still paying interest calculated on the full $320,000, the APR comes out to about 6.84%, noticeably higher than the 6.75% note rate — the exact gap depends on the loan term, since fees matter proportionally less over a longer payoff.
Why Points Push APR Up More Than Flat Fees
Discount points cost 1% of the loan amount each and typically buy roughly a 0.25% rate reduction — a real trade worth evaluating with the Mortgage Points Calculator's break-even math, not just a fee to minimize. Buying points lowers your nominal rate but raises the upfront cost baked into APR, so a lower-rate, higher-point offer can still have a similar or higher APR than a no-point offer.
Pros and Cons of Comparing by APR
Pros: APR is the standardized, apples-to-apples way to compare total loan cost across lenders, since it accounts for fees the quoted rate alone hides.
Cons: APR assumes you keep the loan for its full term — if you plan to sell or refinance in a few years, upfront fees amortized over 30 years understate their real per-year impact on your shorter actual holding period.
Who Should Use This Calculator
Use it if you're comparing Loan Estimates from multiple lenders and want a single number that captures rate and fees together. Skip it if you're only evaluating one offer with no fees to compare against — in that case, the quoted rate and APR will be nearly identical anyway.
Frequently Asked Questions
Why is my mortgage's APR higher than the interest rate?
APR bakes in points and lender fees, spreading their cost across the loan term and expressing the total as a single annualized rate — which is always at or above the plain interest rate whenever any fees are charged.
Should I compare mortgage offers by rate or APR?
APR is generally the better single number for comparing total cost across lenders, since a lower rate with high fees can actually cost more than a higher rate with low fees. Compare both, plus the actual dollar amount of fees.
Do discount points affect APR?
Yes — points are treated as prepaid interest in the APR calculation, so buying points lowers your rate but adds to the upfront cost baked into APR.
Does APR account for PMI?
Under federal disclosure rules, PMI is typically excluded from APR on conventional loans, even though it's a real monthly cost — this is a known limitation of relying on APR alone.
Is a lower APR always the better mortgage?
Usually, but check your expected time in the home — a loan with more upfront fees (and thus higher APR) can still be the better deal if it has meaningfully lower monthly payments and you plan to keep it long enough to benefit.
How is mortgage APR actually calculated?
It's solved numerically — finding the interest rate that would make your actual monthly payment stream exactly equal to the loan amount minus fees, when discounted back to today's value. There's no simple formula; lenders and this calculator both use iterative approximation.