What is the difference between a mortgage APR and Interest Rate?

My mortgage interest rate is 6.875% and the APR is 7.504% Does the APR of 7.504% sound right if the interest rate is 6.875% ? My mom said that the 2 numbers should be closer together than that. Also, my mortgage banker never even mentioned an APR, and since we are 1st time home buyer's, we were unaware of it. We only knew about the Interest Rate. Thanks for the help.What is the difference between a mortgage APR and Interest Rate?
The Annual Percentage Rate is intended to assist you in determining the true cost of the loan over its entire life, usually 30 years. If you refinance your loan or sell the home before the end of the term, your true APR would be higher than that originally provided. Your monthly payment will be based on the stated rate, and the APR takes into account the payment of points, origination fees, prepaid interest and PMI (if required), among others. The APR shown in advertisements is based on certain assumptions, such as loan amount and a down payment of at least 20%. The APR on your specific loan will be different than the advertised APR. In addition, lenders may calculate the APR differently, and, as a result, it can be very misleading. APR calculations for Adjustable Rate loans are further complicated by assumptions used in estimating a rate of interest after the initial fixed period. Our advice is to obtain all fees in dollars and, for adjustable rate loans, know how the new rate will be determined once the fixed rate period is over (i.e. caps, index and margin). This approach allows you to compare loans in terms that are more easily understood.What is the difference between a mortgage APR and Interest Rate?
Mortgage APR is the annual cost of a mortgage, including the interest, the mortage insurance, and the expressed as a percentage fees of its origins or initial fees.
Annual Percentage Rate (APR) is an expression of the effective interest rate that the borrower will pay on a loan, taking into account one-time fees and standardizing the way the rate is expressed. In other words the APR is the total cost of credit to the consumer, expressed as an annual percentage of the amount of credit granted. APR is intended to make it easier to compare lenders and loan options.





The APR is likely to differ from the ';note rate'; or ';headline rate'; advertised by the lender, due to the addition of other fees that may need to be included in the APR. Therefore, the APR is a way for you to compare companies against one another based on that difference from the note rate/interest rate to the APR rate. If you've got one company giving you 6.875 with a 7.5 APR and another at 6.875 with 7.1, you're getting a better deal with the second.





Good luck.
The APR takes into account the fees you are paying to get the loan so your mother is right, if the lender is charging you less fees, then the APR will be closer to the Interest rate. I don't know what kind of loan you are getting, but both the rate and fees seem high for a conventional loan - if you have credit issues that would make a little more sense, but I encourage you to make sure you know all of your options.





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