APR vs Interest Rate: Which Number Should You Compare?

Interest rate prices the borrowed balance

The note rate drives the principal-and-interest payment on a fixed-rate loan. It does not by itself show every finance charge paid to obtain that loan. Two offers can have the same interest rate but different upfront fees.

APR adds certain borrowing costs

Annual percentage rate expresses the rate plus certain finance charges as an annualized cost. Because fees are included, APR is usually higher than the note rate. It is useful for comparing similarly structured loans, but it is not the rate used directly in your monthly payment formula and it does not include every dollar due at closing.

Compare like with like

• Use the same loan type, term, amount, down payment, and rate-lock period.
• Check discount points, lender credits, origination charges, and cash to close.
• Consider how long you expect to keep the loan; APR assumes a particular time horizon.
• For adjustable-rate loans, understand that future rate changes make comparisons more complex.

Enter the note rate, not APR, in the mortgage calculator. Use the Loan Estimate's APR and fee sections to compare lenders, then test the payment impact of each actual note rate.