What is APR?The Annual Percentage Rate (APR) is a number intended to help borrowers compare mortgage fees and the interest rates among banks for the same loanA better way than APR to compare loans is "apples for apples" such as how one lender's origination points, discount points, and underwriting costs compare to another lender. But the APR is an attempt to give you roughly the same information without having to compare line by line costs. It is not a good comparative tool (as opposed to comparing line by line costs yourself) for different loan amounts since the higher the loan amount, the less impact the fees have on the APR since they are calculated as a percentage. Let me give an example... If you take out a $100,000 loan at 6% with $5,000 closing costs, the APR would be calculated to be 6.485%. But a $300,000 loan at 6% with $8,000 of closing costs would have an APR calculated at just 6.254% In fact APR calculations between lenders is not a good comparison tool either because each lender has their own list of items that are or are not used in calculating the APR. Then what good is it you ask? I don't have a clue. But our congressmen wanted to come up with something in case line by line comparisons were too difficult for the average borrower. And just because it didn't work was no reason to not make it a law. Typical fees used in APR rates |