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Rate vs APR: the one number that tells the truth
Two loans with the same rate can cost very different amounts. The APR is how you spot the difference before you sign.
Daniel Okafor
First-time buyer advisor
What the rate leaves out
The interest rate is the cost of borrowing the money itself. It does not include lender fees, points or mortgage insurance, which can add thousands to the cost of a loan.
Why APR is better for comparing
The APR folds most of those costs into a single yearly percentage. When you compare two offers, the one with the lower APR usually costs less over the full term.
When APR can mislead
APR assumes you keep the loan for the full term. If you plan to sell or refinance in a few years, look at the upfront fees as well, since you pay those even if you leave early.
