Mortgage APR Calculator
This calculator will help you determine an effective interest rate for a mortgage inclusive of upfront costs. First input your mortgage loan amount, the quoted interest rate, the loan term, a points percentage, and any associated closing costs.
Click on CALCULATE APR, and you’ll receive a breakdown of all costs pertaining to the mortgage. To top it all off, you’ll get a number for what you’re APR truly is.
Explore Great Mortgage Options
This table helps homebuyers explore their mortgage options. You can click on the refinance button to switch away from purchase loans to refinancing options & other loan features are included in the filter section which let you change the loan amount, the home's location, the downpayment on the home, the loan term & more.
See the Real Effective Rate
Know the facts about interest rates and fees so you don't get fooled by the advertised APR. Here are a number of factors that can influence what you pay on your next credit card or home loan. Commit them to memory before you walk into the lender's office.
The Effects of Compounding Interest
Compounding happens when a loan or investment earns interest on past interest. Credit card companies or mortgage lenders don't usually adjust advertised APR to include compounding because it leads to higher interest rates depending on how often compounding occurs. For example, a credit card company charges you 2 percent interest each month on your balance for a total of 24 percent for the year. That sounds competitive, but every month that 2 percent gets added to your overall balance, which allows it to compound. The real interest you pay is 26.82 percent.
To avoid any surprises, ask your lender or card company about their offer's annual percentage yield (APY). This figure takes compounding into account, giving you a better picture of what you're actually paying.
Fear Introductory APR Offers
Credit card companies have lured unsuspecting consumers with outrageously low APR offers for years. The APR flashing on the TV ad or printed on the mailer shouting "You're Pre-Qualifed!" in bold letters seems like a great idea, but the fine print ruins all that promise. The introductory APR, usually zero percent, lasts for only a short time. If you carry a balance on the card past the special offer, you'll get hit with the new, higher APR all at once.
Check the fine print on the credit card application to find out what the APR changes to after the promotion ends. Use that number as the deciding factor to either apply or throw the offer in the garbage.
Fees Excluded From the Interest Rate
There are no rules dictating how lenders include or exclude fees from their advertised APR offers on mortgages and other loans. Lenders get to pick what goes into the APR calculation in terms of added costs, including appraisal and brokerage fees. Excluding these costs from the APR calculation can give an artificially low number, which could make it more attractive if you don't know to check the fine print. Some fees, including closing costs, also vary from lender to lender. The APR on the paperwork won't specify which fees are too high or unnecessary.
Many states require an attorney representing you as a borrower to check all mortgage documents before the agreement can become binding. Paying a mortgage lawyer for an hour to look over the documents and make sure the lender isn't doing math gymnastics to cook their APR is well worth the cost.
APR Based on Broad Assumptions
Lenders make a number of perfect world assumptions when they create mortgages. They assume you won't sell the house before paying off the balance in full, refinance to get a lower interest rate, or pay the loan off early. Any one of those instances changes the APR on the loan because it alters the lender's timeline to repayment. The loan also doesn't take inflation into account, which can diminish dollar value and erode consumer purchasing power.
To help combat the assumption-laden mortgage world, the federal government created the Truth in Lending Act. The crux of the law requires the lender to include an annual percentage rate that includes fees and other costs next to their advertised APR to give consumers a better idea of what they might pay.
The Loan has a Variable Rate
Quoting an APR on a variable rate loan, including a mortgage or personal loan, is always misleading because the interest rate fluctuates by period: monthly, semiannually, annually, etc. Your semi-annual home loan could have smaller payments for the first six months and much larger payments for the following six months depending on how the rate fluctuates.
A lender advertising an APR for a variable rate loan, including a mortgage, isn't giving a true sense of what you could pay as a prospective borrower because the lender can't predict the future. With a variable rate loan, you and your home are at the mercy of prevailing economic conditions beyond any one person's control. In other words, steer clear.
Understanding your rights and the legal language of lending before you make a serious financial commitment is important to help you stay protected. Getting to know APR is an important first step toward making the smartest lending choice possible to fit your needs.