Mortgage APR Calculator

APR is the rate that makes the money you actually receive equal the present value of your payments — an internal rate of return on the loan’s cash flows (Reg Z / TILA basis). With no fees it equals the note rate; points and lender charges push it higher.

Note rate vs APR — why they differ

Lenders quote two rates, and they are not the same. The note rate (or interest rate) is what your monthly payment is calculated on. The APR — annual percentage rate — is the true yearly cost once points and lender fees are baked in, and it is almost always higher. The gap exists because those upfront charges are part of what the loan costs you, even though they do not change the payment. The APR spreads them across the life of the loan and expresses the lot as a single rate, which is exactly why regulators require it: it lets you compare a low-rate-high-fee offer against a high-rate-low-fee one on one honest number.

This calculator computes the APR the proper way — as the rate that makes the money you actually receive equal the present value of your payments, an internal rate of return on the loan’s cash flows. Enter the note rate, term and your fees, and it shows the APR, the note rate, and the gap between them in plain rate terms.

Worked example — a $400,000 loan at a 6.5% note rate over 30 years, with 1 point ($4,000) and a $1,500 origination fee: The payment is set by the 6.5% note rate, about $2,528 a month. But the $5,500 of fees push the APR to roughly 6.63% — about 0.13 points higher than the quoted rate.

Points, break-even and how long you stay

Discount points are prepaid interest: you pay a fee upfront to buy a lower rate. Whether that pays off depends entirely on how long you keep the loan. Enter the rate you would get without points as the par rate, and the calculator works out the break-even — the months it takes the lower payment to recoup the points cost. Stay past it and the points were worth it; sell or refinance before it and you have simply paid extra. It is the same logic the APR captures: front-loaded costs only pay off over time.

That is also why the holding period matters for the APR itself. The standard APR assumes you keep the loan for its full term, spreading the fees over 30 years. If you will move in five, those same fees are spread over five years instead — so the effective APR you actually experience is higher. Enter your real holding period and the calculator re-solves the APR with the loan paid off at that point, which is the figure that matters if you do not plan to stay forever.

What the APR does and doesn’t include

The APR is powerful but not perfect. Under US rules (Regulation Z / TILA), it includes lender finance charges — points, origination, underwriting and the like — but excludes many third-party costs such as appraisal, title insurance and recording fees, and the rules on what counts vary. So treat the APR as a strong basis for comparison rather than a precise total cost, and make sure you are comparing like with like across lenders. This calculator counts the finance charges you enter and presents the result as indicative.

You can also choose whether fees are paid upfront or financed into the loan. Rolling them in means no cash at closing, but you pay interest on the fees for the life of the loan, which nudges the APR and total cost higher still. The cost-of-credit breakdown shows where your money goes — interest versus points versus other fees — and the schedule behind it is the amortisation the APR is derived from.