APR Calculator (True Loan Cost)

The Loan

Enter every fee the lender charges. APR is only useful if the fee list is complete.

Loan amount

Quoted interest rate

Term

years

Origination and lender fees

Discount points1 point = 1% of the loan

Other financed closing costs

EFFECTIVE APR

—

Quoted interest rate—

Difference—

Monthly payment—

Total fees—

Cash actually received—

Total interest over the term—

If you leave early

APR if repaid after 5 years—

APR if repaid after 10 years—

Break-even on the points—

Fees as a share of the loan

—

What APR actually measures

APR is the interest rate that makes the present value of your payments equal to the cash you genuinely received — loan amount minus fees. Because fees reduce the cash but not the payments, the implied rate rises. There is no closed-form solution, so it is found by iteration, which is exactly what this page does.

Points only pay off if you stay

Paying a point buys a lower rate for the life of the loan, so it is a bet on how long you keep it. The break-even line above divides the upfront cost by the monthly saving. Most US mortgages end — through sale or refinance — well before 30 years, which is why a break-even beyond about seven years usually argues against buying points.

Why APR understates the cost of a loan you repay early

APR spreads the fees across the whole term. Repay in five years and the same fees are absorbed over a sixth of the time, so the effective annual cost is far higher — the five-year and ten-year lines above show by how much. For anyone who expects to move or refinance, those figures are more decision-relevant than the headline APR.

Frequently Asked Questions

What is the difference between interest rate and APR?

The interest rate prices the borrowed money alone. APR includes lender fees, points and financed closing costs, so it reflects the total cost of credit expressed as an annual rate.

Is a lower APR always the better loan?

Usually, but not always. APR assumes you hold the loan for the full term. If you expect to repay early, the loan with lower fees and a slightly higher rate can cost less overall.

What is a discount point?

A fee equal to 1% of the loan amount, paid upfront to reduce the interest rate. It pays off only if you keep the loan past the break-even point shown above.

Does APR include everything?

It includes lender-imposed costs of credit. Third-party charges such as appraisal, title insurance and prepaid taxes may or may not be included depending on the loan type, so always compare the fee lists, not just the APRs.

Where these numbers come from

Sources

Official publications only. Links open the original document in a new tab.

Consumer Financial Protection Bureau What is the difference between a mortgage interest rate and an APR? The regulatory definition of APR
Consumer Financial Protection Bureau Owning a home — buying a house Which costs lenders must disclose

APR Calculator