APR Calculator
Turn a rate, points and lender fees into the annual percentage rate, worked out the way Regulation Z requires, and see which fees count.
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Educational estimates only. Not financial, tax, or lending advice.
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What is the APR on my mortgage?
APR is the cost of the loan as a yearly rate once the fees are counted. In the example below, a $300,000 loan at 6.5% for 30 years has a $1,896.20 payment. With $7,000 of points and fees taken at closing, you receive $293,000, and the APR is 6.728%.
The APR is higher than the rate because you pay interest on the full loan but get the use of less than that. It is meant for comparing one offer against another, not for working out your payment.
The APR on these figures
APR
6.728%
0.228 points above the 6.5% note rate.
Monthly payment
$1,896.20
Principal and interest, from the note rate.
Amount financed
$293,000
The loan minus the finance charges paid at closing.
Finance charges
$7,000
$3,000 of points, $2,500 of lender fees and $1,500 of other charges.
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The APR spreads those fees over the whole 30-year term. If you sell or refinance sooner, the fees cost you more per year than the APR suggests. To price that, use the mortgage points calculator or the closing cost calculator.
Assumes level monthly payments and a first payment one month after closing. A Loan Estimate can differ by a small amount because of odd first periods and how each lender counts prepaid interest. Your lender’s figure is the one that counts.
How the APR is worked out
Find the rate that makes the payments worth exactly what you received.
Regulation Z says the APR is found with the actuarial method, laid out in 12 CFR 1026.22 and Appendix J. Start with the amount financed: the loan minus the points and fees you pay at closing. Then look for the monthly rate at which every payment, discounted back to the day of closing, adds up to that amount. For monthly payments, the APR is that monthly rate times 12.
There is no formula that gives the answer directly, so the calculator tries rates and halves the gap until the two sides agree to a fraction of a cent. You can check it yourself: take the payment $1,896.20, discount all 360 of them at 6.728% divided by 12 a month, and the total comes to $293,000.
APR vs interest rate
The rate sets your payment. The APR is for comparing offers.
| Charges | Amount financed | Monthly payment | APR |
|---|---|---|---|
| None | $300,000 | $1,896.20 | 6.500% |
| $4,000 of fees, no points | $296,000 | $1,896.20 | 6.629% |
| Fees and 1 point | $293,000 | $1,896.20 | 6.728% |
| Fees and 1 point, over 15 years | $293,000 | $2,613.32 | 6.876% |
A made-up $300,000 loan at 6.5%. The payment does not move as fees are added, because the rate does not move. Only the APR does. The same fees weigh more on a 15-year loan, because there are fewer years to spread them over.
APR assumes you keep the loan to the end of its term. If you sell or refinance in five years, the fees were spread over fewer payments than the APR assumes, so they cost you more per year. For that decision, compare the cash you pay over the years you expect to stay, with the refinance calculator. The APR glossary entry covers the short definition.
Which fees count toward APR
Regulation Z splits closing costs into finance charges and everything else.
| Charge | In the APR? |
|---|---|
| Interest, including prepaid interest | Yes |
| Discount points and origination points | Yes |
| Origination, underwriting and processing fees | Yes |
| Mortgage broker fees | Yes |
| Mortgage insurance premiums | Yes |
| Title search, title insurance and survey | No, if reasonable |
| Appraisal and credit report | No, if reasonable |
| Preparing the deed and loan documents, notary | No, if reasonable |
| Escrow deposits for tax and insurance | No |
| Recording fees and transfer taxes | No |
From 12 CFR 1026.4 as the CFPB publishes it. The exclusions in 1026.4(c)(7) apply only when the charge is bona fide and reasonable in amount. Check the Loan Estimate for how your lender classed each line.
Enter the charges marked “Yes” and leave the rest out. Monthly mortgage insurance is not modelled. Only an upfront premium belongs in the “other prepaid finance charges” box, so if your loan has monthly mortgage insurance, the result may read below the APR on a Loan Estimate that includes it. A title fee or an appraisal is a cost of buying a home that you would owe even with a cash purchase, so it does not measure the cost of credit. To see all your closing costs together, use the closing cost calculator.
Where this differs from a Loan Estimate
Expect a small gap between this figure and the one your lender discloses.
This calculator assumes level payments and a first payment exactly one month after closing. Real loans often have a first period that is a little longer or shorter, and lenders differ in how they count prepaid interest and mortgage insurance. Regulation Z treats a disclosed APR as accurate if it is within one eighth of a percentage point of the exact figure, so a small difference from your lender’s number is normal. A large one means a fee was counted differently. Ask your lender which.
If you are weighing points specifically, the mortgage points calculator gives the break-even month, which the APR cannot tell you.
APR questions
- How is APR calculated on a mortgage?
- Regulation Z uses the actuarial method. Take the amount financed, which is the loan minus the prepaid finance charges. Then find the yearly rate at which the monthly payments, each discounted back to the day of closing, add up to that amount. For monthly payments, the APR is the monthly rate that solves it, times 12. This calculator finds it by repeated halving until the two sides match to a fraction of a cent.
- Why is my APR higher than my interest rate?
- Because you receive less than the loan amount. Points and lender fees are charged at closing, so you borrow $300,000 and get the use of less. You still pay interest on all of it, so the cost per dollar you actually received is higher than the note rate. The more finance charges, the wider the gap.
- Which closing costs are included in APR?
- Interest, discount and origination points, loan and broker fees, and mortgage insurance premiums are finance charges. For a home loan, bona fide and reasonable charges for title work, appraisal, credit reports, surveys, document preparation, notary and escrow deposits are left out, and so are recording fees and taxes. Prepaid interest is interest, so it counts. Your Loan Estimate shows the result.
- Can two loans with the same APR be different?
- Yes. APR assumes you keep the loan for its whole term. One loan with high fees and a low rate and another with low fees and a higher rate can land on the same APR, and the first wins only if you stay long enough. If you may move or refinance within a few years, compare the cash you pay over those years instead.
- Is this the same APR my lender will quote?
- It should be close, but it can differ. A disclosed APR is treated as accurate if it is within one eighth of a percentage point of the true one, and lenders handle odd first payment periods, prepaid interest and mortgage insurance in their own way. Use this to compare offers and to check a quote. Your Loan Estimate is the official figure.
- Does APR include property tax and homeowners insurance?
- No. Property tax, homeowners insurance and the escrow deposits for them are not finance charges, because you would owe them whether or not you borrowed. They affect your monthly payment but not the APR.