Mortgage APR Calculator

When you shop for a mortgage you'll see two rates on every offer: the interest rate (or note rate) and the APR. The interest rate sets your monthly payment; the APR is higher because it folds in the up-front cost of points and closing fees, spreading them across the loan term to express the true annual cost of borrowing.

This calculator computes the APR from your loan amount, rate, term, and up-front costs (the same disclosure lenders are required to provide), so you can compare offers with different rate-and-fee combinations on an apples-to-apples basis.

How does this calculator work?

Enter your mortgage amount, interest rate, term, closing costs, and points. The calculator computes the monthly payment from the note rate, then solves for the rate that equates your financed amount (loan minus up-front costs) to that payment stream: that's the APR.

Because the APR effectively treats your fees as extra interest, it rises as points and closing costs rise, even when the note rate is unchanged.

Compare two offers by their APR rather than their headline rate to see which is genuinely cheaper over the full term.

Worked example

Compare two offers on a $300,000, 30-year mortgage: a 6.5% rate with no points, versus a 6.25% rate that costs 2 points ($6,000) plus $2,000 in fees.

Offer A, rate / fees

6.5% / $0

Offer A, APR

6.50%

Offer B, rate / fees

6.25% / $8,000

Offer B, monthly payment

$1,847

Offer B, APR

6.51%

How the numbers work

Offer B's $1,847 payment comes from applying its 6.25% rate to the full $300,000 over 360 months.

To find the APR, the calculator asks a different question: what single rate, charged on the amount you actually net after the $8,000 in costs ($292,000), would produce that same $1,847 payment? The answer is 6.51%, above the 6.25% note rate because the fees behave like extra interest spread over the loan.

Offer A has no fees, so its APR (6.50%) barely moves off its rate. Lined up by APR, the two offers are nearly identical despite B's lower headline rate.

On paper Offer B's 6.25% rate looks better, but once its $8,000 in up-front costs are folded in, its APR (6.51%) is essentially the same as Offer A's (6.50%). The lower-rate loan only wins if you keep it long enough to recoup the $8,000 through lower payments.

That break-even is the real question with points: divide the up-front cost by the monthly savings to see how many years you must stay to come out ahead.

Rate vs. APR: which should you compare?

The note rate determines your actual monthly payment and how fast you build equity. The APR is a comparison tool that bundles fees into a single annualized number. For comparing lenders, APR is more honest because it captures the cost of points and closing fees a low headline rate might be hiding.

APR has one important limitation: it assumes you keep the loan for its full term. If you expect to sell or refinance within a few years, a loan with a higher rate but lower up-front fees can actually cost you less, because you won't be around long enough to benefit from the buy-down you paid for.

When paying points pays off

Discount points are prepaid interest: each point costs 1% of the loan and buys a lower rate. They make sense when you'll hold the mortgage well past the break-even point: the month when accumulated payment savings equal the up-front cost of the points. The longer you stay, the more you save. If there's a real chance you'll move or refinance before break-even, skip the points and keep the cash.