The Difference Between Interest Rates and A.P.R.

As a result of federal laws enacted to protect consumers, you'll see the "Annual Percentage Rate" and "Interest rate" for each mortgage loan you see advertised.

The A.P.R. is designed to represent the "true cost of a loan" to the borrower, expressed in the form of a yearly rate. This way, lenders can't "hide" fees and upfront costs behind low advertised rates.

While A.P.R.s are designed to make loan comparisons easier, they can sometimes be confusing because they do not include all the fees and insurance premiums that accompany a mortgage. A.P.R.s can vary widely from lender to lender and loan to loan.

The interest rate on a 5/1 adjustable rate mortgage is subject to change based on the market index. The A.P.R. adjusts the interest rate every year. The A.P.R. on an ARM assumes the market index will never change, but it does change, which is why ARMs were invented in the first place!

Mortgage professionals will help you find the best loan for you — even if it's not the loan with the lowest A.P.R.

Please Note: when you're browsing for loan terms that the A.P.R. will not tell you about balloon payments or prepayment penalties, or how long your rate is locked. Also, you'll see that A.P.R.s on 15-year loans will carry a higher relative rate due to the fact that points are amortized over a shorter period of time.

**Disclaimer: Not all applicants will qualify. Please meet with a licensed loan originator for more information. Rates, fees, terms, and programs are subject to change without notice. Not all loans, loan sizes, or products may apply. Loans are subject to borrower qualifications, including income, property evaluation, sufficient equity in the home to meet loan-to-value requirements, and final credit approval. Approvals are subject to underwriting guidelines and program guidelines and are subject to change without notice.**