What’s the Difference Between Interest Rate and APR?
July 14, 2022
July 14, 2022
If you’re looking to buy a home or already own, you may be familiar with the terms interest rate and APR. Although they’re both used in reference to mortgage rates, these terms are not interchangeable. Knowing the difference is important and could save you thousands of dollars on your mortgage.
The difference between an interest rate and the APR is as follows:
Because the APR includes additional costs, it is typically higher than your interest rate.
It's important to shop around and get APRs from several lenders. This allows you to compare all the fees, apples-to-apples, and determine which lender is right for you.
It’s just as important to know where to find each rate. When you apply for a mortgage, you’ll receive a loan estimate that includes the terms of your loan and all estimated costs. You can find the interest rate on page 1 under “Loan Terms” and the APR on page 3 under “Comparisons.”
Both the interest rate and APR are quoted to provide you with as much information as possible during the homebuying process.
But which one should you pay attention to? It depends.
For more information about buying a home, visit My Home by Freddie Mac®.