By Jennifer Tucker
September 3, 2024 | 2 Min. Read
Annual percentage rate (APR) is the yearly rate charged for a loan. It provides you with a bottom-line number you can use to compare different lenders and the loans they offer.
The APR gives you transparent information about what you’re really paying for your home loan. The Federal Truth in Lending Act requires that every consumer loan agreement disclose the APR.
APR is important because it represents the total cost of your home loan. You can use APR to determine how much you’ll pay over the full life of the loan.
Here’s how to use APR to help you make an informed decision when you’re choosing the home loan that’s right for you:
Use APR as a comparison tool. APR gives you an easy way to compare mortgages from different lenders. It considers both the interest rate and various fees associated with the loan, allowing you to compare the total cost of different loan options more accurately.
Use APR as a total cost assessment. APR gives you a comprehensive picture of the total cost of the loan. This helps you understand the true expense of your mortgage, which is useful for planning and budgeting.
Interest rate is another important factor to consider when you’re looking for a mortgage loan. A seemingly small difference between the interest rate of one loan and the interest rate of another can add up to tens of thousands of dollars over the life of your loan. Learn about the Difference Between APR and Interest Rate.