Mortgage Annual Percentage Rate (APR) Calculator

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What is a Mortgage Annual Percentage Rate (APR)?

The following Mortgage Annual Percentage Rate (APR) Calculator will help determine the true cost of a mortgage using the principal amount, mortgage rate, mortgage term, and closing costs.

Monthly APR Payment
Annual Percentage Rate (APR)

What is an Annual Percentage Rate (APR)?

The Annual Percentage Rate (APR) represents the effective interest rate when considering a mortgage. It incorporates both your quoted (nominal) mortgage rate and any fees associated with the mortgage. Fees can include broker fees, closing costs, rebates, or discount points. If you have any closing costs and no interest rebates, the APR will always be greater than the quoted mortgage rate.

You should always try to find the lowest APR when comparing mortgage loans because it includes all costs. If two lenders are offering the same mortgage rate, but one of them has higher closing costs, it will be reflected in a higher APR. The best way to learn what goes into an APR is to calculate it yourself. You should not use the APR without understanding it because the APR may be misleading under the following circumstances:

  • Fluctuating Interest Rates: While the APR is useful for comparing different lenders, it assumes that your interest rate will remain fixed throughout your entire mortgage term. However, if you have a variable interest rate, your mortgage rate can change, which causes your APR to change. Variable interest rates often fluctuate with the US Federal Reserve (Fed Funds) interest rate, so you should consider how a change in the Fed Funds rate could affect your APR.
  • Mortgage Refinancing: If you decide to refinance your mortgage or otherwise get rid of your mortgage early, the APR will not be exact. When calculating the APR, closing costs and other up-front mortgage fees are distributed throughout the lifetime of the mortgage. But since you pay these costs immediately, getting rid of your mortgage early would ignore some portion of it.

How to calculate APR?

The APR is considered the true cost of a mortgage because it includes any closing costs and mortgage fees as part of the principal amount. Essentially, these fees are "rolled into" your mortgage principal. The easiest way to calculate your mortgage APR is to use a combination of calculations and the Excel PMT/RATE functions.

  • Step 1: Add your mortgage fees to the principal amount. This will be used to calculate a monthly mortgage payment that includes mortgage fees and is how we include mortgage fees in the percentage rate.
  • Step 2: Divide your annual interest rate by 12. This turns your annual mortgage rate into a monthly mortgage rate. Generally, mortgages charge interest every month.
  • Step 3: Find your monthly payment by using the Excel function, PMT, as follows:
  • = PMT(Result from Step 2, Loan Term in Months, Result from Step 1)
  • Step 4: Find the monthly percentage rate by using the Excel function, RATE, as follows:
  • = RATE(Loan Term in Months, Result from Step 3, Principal Amount)
    With this, we can compare the mortgage payment with mortgage fees to our mortgage principal.
  • Step 5: Multiply your result from Step 4 by 12 to get your APR.

Alternatively, you can use our built-in calculator to perform this calculation automatically

Mortgage Interest Rate vs APR

Mortgage Interest Rate: When you look at online lending websites or mortgage ads, they will often display a mortgage interest rate. This mortgage rate often fluctuates with the Fed Funds rate, but is always a couple percentage points higher. Currently, the Fed Funds rate is 0-0.25% and today’s best mortgage rates are about 2-2.25%. Your quoted mortgage rate is used to calculate your interest expense for each month. To find your monthly mortgage rate, you can simply divide your quoted mortgage rate by 12.


If you had $100,000 remaining on your mortgage with a 6% quoted mortgage rate, the interest charge for this month would be
$100,000 * (.06/12) = $500

Annual Percentage Rate (APR): On the other hand, your APR is the actual cost of getting a mortgage. The APR and mortgage rate are very similar, but each monthly payment includes a small portion of your closing costs and upfront mortgage fees. The APR is the interest rate that would be charged on a loan with all closing costs included as part of the principal amount. This helps you compare different lenders because it accounts for all lender-related costs.


Using the same example from the mortgage interest rate, let’s assume we had $5,000 in closing costs and the mortgage term was 10 years. Then the 6% mortgage rate would become a 6.13% APR. Learn how this number was calculated.

Which to Use: When searching for a mortgage, you should use the APR. Nearly all mortgage rate sites and lenders will show you both a quoted mortgage rate and an APR. When comparing lenders, the APR paints a much clearer picture of the cost of financing the mortgage. However, the APR is imperfect because it often excludes optional mortgage insurance or lender-specific fees. To accurately compare mortgage lenders, you should collect any mortgage fees and then calculate the APR on your own.

Any calculators or content on this page is provided for general information purposes only. Casaplorer does not guarantee the accuracy of information shown and is not responsible for any consequences of its use.