APR Calculator · Practical guide
APR vs Interest Rate on a Mortgage
The interest rate prices the loan; the APR folds in upfront fees to show the true yearly cost.
At a glance
The Difference in One Line
The interest rate is the cost of borrowing the principal. The APR (annual percentage rate) includes that rate plus upfront fees and points, so it is always equal to or higher than the quoted rate. On a $300,000, 30-year mortgage at 6.5% with $6,000 in fees, the APR works out to about 6.70%.
Interactive tool
APR Calculator
Enter your own values, then compare the result with the examples below.
APR Results
Same Loan, With and Without Fees
| Scenario | Rate | Fees | Monthly Payment | APR | Total Cost |
|---|---|---|---|---|---|
| No fees | 6.5% | $0 | $1,896.20 | 6.500% | $682,633 |
| With fees | 6.5% | $6,000 | $1,896.20 | 6.695% | $688,633 |
The monthly payment is identical — fees do not change what you pay each month. What changes is the effective yearly cost, which is exactly what APR captures.
When the Gap Grows
Fees move APR more on smaller or shorter loans. A $25,000 five-year car loan at 9% with $800 in fees has an APR of 10.40% — a 1.4-point gap, compared with only 0.2 points on the mortgage example. That is why lenders must disclose APR: it lets you compare a low-rate, high-fee offer against a higher-rate, no-fee one on equal footing.
How to Compare Two Offers
Run each offer through the calculator with its own rate and fee total. The loan with the lower APR costs less over the full term, assuming you keep it that long.
Frequently Asked Questions
Is APR always higher than the interest rate?
APR is higher whenever the loan carries upfront fees or points. With zero fees, the APR equals the interest rate.
Does APR include all loan costs?
Standard APR covers upfront finance charges like origination fees and points. Ongoing fees, such as annual charges, are typically excluded unless the lender specifies otherwise.
Why do lenders advertise the interest rate instead of APR?
The interest rate produces the lower, more attractive number. Regulations require APR disclosure alongside it so borrowers can see the full cost.
Is a lower APR always the better deal?
If you keep the loan for its full term, yes. If you plan to sell or refinance early, upfront fees may not pay back, so a slightly higher APR with lower fees can win.