1. What is APR for Mortgage?

The Annual Percentage Rate (APR) for a mortgage represents the true cost of borrowing, including interest and other fees, expressed as a yearly rate. It provides a more comprehensive measure than the simple interest rate alone.

2. How Does the Calculator Work?

The calculator uses the APR equation:

Where:

• \( Total\ Cost \) — The total amount paid over the life of the loan
• \( Principal \) — The original loan amount
• \( Days \) — The term of the loan in days

Explanation: The equation calculates the annualized percentage cost of borrowing by comparing the total finance charges to the principal amount.

3. Importance of APR Calculation

Details: APR allows borrowers to compare different mortgage offers on an equal basis, as it includes both interest rates and additional fees. A lower APR generally indicates a better deal.

4. Using the Calculator

Tips: Enter the total repayment amount (including all fees), the original loan amount, and the loan term in days. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between APR and interest rate?
A: The interest rate only reflects the cost of borrowing the principal, while APR includes additional fees and costs associated with the loan.

Q2: Why is APR important for mortgages?
A: APR helps borrowers compare different mortgage products by showing the total cost of borrowing, not just the interest rate.

Q3: What is a good APR for a mortgage?
A: This varies by market conditions, but generally, lower APRs are better. Compare multiple offers to determine what's competitive.

Q4: Does APR include all mortgage costs?
A: APR includes most costs but may exclude some fees like appraisal, title insurance, or attorney fees.

Q5: How does loan term affect APR?
A: Shorter-term loans typically have lower APRs because interest costs are spread over fewer years.