Mortgage APR Calculator
Calculate APR the way a Loan Estimate does: points, lender fees, mortgage insurance and credits, with two offers compared side by side and a break-even month.
The home and your plans
| Offer A | Offer B | |
|---|---|---|
| Interest rate (note rate) | 6.750% | 6.250% |
| APR | 6.857% | 6.451% |
| APR minus note rate | 0.107 pts | 0.201 pts |
| Principal & interest per month | $2,334.95 | $2,216.58 |
| Monthly mortgage insurance | none | none |
| Amount financed (for APR) | $356,100 | $352,500 |
| Note principal (loan balance at closing) | $360,000 | $360,000 |
| Prepaid finance charges in the APR (after credits) | $3,900 | $7,500 |
| Total interest over the full term | $480,583 | $437,969 |
| Mortgage insurance over the full term | $0 | $0 |
| Total finance charge (interest + fees + MI) | $484,483 | $445,469 |
| Total interest percentage (TIP) | 133.75% | 121.91% |
| Upfront loan fees, before credits | $8,400 | $12,000 |
| Lender credit applied | $0 | $0 |
| Cash for loan fees (not financed) | $8,400 | $12,000 |
| Cash for prepaids and escrow deposits | $4,200 | $4,200 |
| Total cash for closing costs (not the down payment) | $12,600 | $16,200 |
| If you leave after | Offer A | Offer B | Lower cost |
|---|---|---|---|
| 1 yr | $32,583 | $34,381 | Offer A |
| 3 yr | $80,128 | $78,310 | Offer B |
| 5 yr | $126,450 | $121,009 | Offer B |
| 7 yr | $171,371 | $162,314 | Offer B |
| 10 yr | $235,678 | $221,246 | Offer B |
| If you leave after | Offer A | Offer B |
|---|---|---|
| 1 yr | $40,619 | $42,799 |
| 3 yr | $96,658 | $95,997 |
| 5 yr | $152,697 | $149,195 |
| 7 yr | $208,736 | $202,393 |
| 10 yr | $292,794 | $282,190 |
APR assumes you keep the loan to the end of its term. That is why the cost-over-time tables matter if you may sell or refinance sooner. Estimates only; your Loan Estimate and Closing Disclosure control.
How this APR is calculated, and its limits
- Fixed-rate, fully amortizing loan with equal monthly payments and a full first payment period (the Regulation Z regular-payment case). Adjustable-rate, interest-only and balloon loans are not modeled.
- APR is the exact root of the Appendix J actuarial equation. A Loan Estimate rounds it (to three decimals) and may differ by a small tolerance from a lender's system.
- Amount financed = note principal minus prepaid finance charges, after lender credits. Fees are never added to the rate as a percentage.
- Only the fees you put in an APR category (origination, points, broker, underwriting, tax service, prepaid interest, upfront mortgage insurance) reduce the amount financed. Title, appraisal, recording, prepaid taxes/insurance and escrow deposits are shown as cash but excluded from the APR.
- Monthly mortgage insurance is counted as a finance charge for the months it is scheduled to be paid (conventional PMI: until the scheduled balance reaches 78% of the original value, if you choose that rule).
- Lender credits are applied to finance-charge fees first, then to other closing costs. Seller credits are not lender credits and do not change the APR.
- Which government fees (for example a VA funding fee) are finance charges is a classification you should confirm on your Loan Estimate; the calculator uses whatever category you choose.
- The APR assumes you keep the loan to maturity and make every scheduled payment. If you sell or refinance sooner, compare the cost-over-time table instead.
How the APR is calculated
The APR is the periodic rate i that solves the equation below; the APR is 12 × i. It follows the U.S. closed-end method in Regulation Z and Appendix J for a fixed-rate loan with equal monthly payments.
Σ [ (Principal & interest + Monthly mortgage insurance) ÷ (1 + i)^t ] = Amount financed
Fees are never added to the rate as a percentage. Only the costs in the “Counted in the APR” group reduce the amount financed; title, appraisal, recording, prepaid taxes and insurance and escrow deposits are shown as cash you need but are left out of the APR. Fees you roll into the loan raise the balance and the payment, but they stay finance charges.
Rate, APR, cash to close and total cost are four different numbers
Note rate sets your principal and interest payment. APR annualizes the rate plus certain costs over the full term. Cash to close is what you bring on closing day, including costs that are not in the APR. Total borrowing cost is what the loan costs in dollars for the time you actually keep it. Read the full explanation in APR vs interest rate, then use the Loan Estimate comparison checklist on real quotes.
Limits
This tool does not model adjustable-rate, interest-only or balloon loans, odd first payment periods or a lender’s own rounding. Government-program fees (such as a VA funding fee) are classified by you; confirm the treatment on your Loan Estimate. It is an educational estimate, not a loan offer.
Sources and further reading
- What is the difference between a mortgage interest rate and an APR? (CFPB)
- 12 CFR 1026.22: Determination of annual percentage rate (CFPB (Regulation Z))
- Regulation Z Appendix J: Annual percentage rate computations for closed-end credit (CFPB (Regulation Z))
- Loan Estimate Explainer (CFPB)
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Frequently asked questions
How is APR calculated?
APR is the yearly rate that makes the present value of all your scheduled payments equal the amount you actually receive, which is the loan minus the prepaid finance charges. It is found by solving an equation, not by adding fees to the rate. The method is set out in Regulation Z, Appendix J.
Which closing costs are included in the APR?
Finance charges: discount points, origination and broker fees, underwriting and processing fees, prepaid interest, upfront mortgage insurance and monthly mortgage insurance. Bona fide third-party costs such as the appraisal, title work, recording fees and transfer taxes are generally excluded, as are prepaid taxes and insurance and escrow deposits.
Does APR include mortgage points?
Yes. Discount points are prepaid finance charges, so they raise the APR. A lender credit works the other way: it reduces the prepaid finance charges it is applied to and can lower the APR.
Why is my APR higher than my interest rate?
Because the APR spreads your upfront finance charges and any mortgage insurance over the loan, on top of the interest. If you pay no points or fees and have no mortgage insurance, the APR equals the note rate.
Does a lower APR mean a cheaper loan?
Not always. APR assumes you keep the loan for its whole term. If you may sell or refinance in a few years, the cost-over-time table and the break-even month are the better guide.
How does mortgage insurance affect APR?
Monthly mortgage insurance is a finance charge, so it is counted for the months it is scheduled to be paid. This calculator lets you end it at 78% of the home's value (typical for conventional PMI), after a set number of months, or never.
Will this match my Loan Estimate exactly?
It should be very close if you classify each fee the way your Loan Estimate does, but lenders round the APR and may treat some items differently. Federal rules allow a disclosed APR to be within 1/8 of a percentage point of the correct figure. Treat this as a check on the Loan Estimate, not a replacement for it.
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Analyze a property with Reaixo →Educational Use Only: Reaixo is not a lender, mortgage broker, financial advisor, or loan originator. Calculations are estimates for informational and educational purposes only and may not include every cost associated with a mortgage. Rates, APRs, fees, taxes, insurance, mortgage insurance, eligibility, and loan terms vary by borrower, property, lender, loan program, and market conditions. Verify all figures and loan terms with a qualified lender and review your official Loan Estimate before making a financial decision.