(1) The total costs (interest rate, closing costs, fees, and so on) that are part of a borrower’s loan, expressed as a percentage rate of interest. The total costs are amortized over the term of the loan.
(2) APR is a number that represents the total cost of a loan as a percentage, which allows you to compare total loan costs when deciding on a mortgage loan. APR takes into account your interest rate and all associated fees and rebates, spreads them out over the life of the mortgage, and expresses the total cost as a percentage rate.
A loan with a lower APR isn’t always the best deal. To identify the best deal for you, evaluate the entire cost of the loan for the time you plan to own the home.
APR is a good place to start when evaluating the total cost of a loan. Your lender will estimate all costs associated with the loan, as well as the APR, in a Loan Estimate. Learn about the differences between interest rate and APR.