Annual Percentage Rate (APR)

The annual percentage rate (APR) is your interest rate plus ancillary charges and fees—such as closing costs and discount points- expressed as a yearly rate. The annual cost of a loan to a borrower. By law, a loan’s APR is always expressed as a percentage next to the interest rate. The APR gives the best indication of the total cost of your mortgage. Like an interest rate, the APR is expressed as a percentage. Unlike an interest rate, however, it includes other charges or fees (such as mortgage insurance, most closing costs, discounts points and loan origination fees) to reflect the total cost of the loan. The Federal Truth in Lending Act requires that every consumer loan agreement disclose the APR. Since all lenders must follow the same rules to ensure the accuracy of the APR, borrowers can use the APR as a good basis for comparing the costs of similar credit transactions.