APR Calculator
Calculate the true Annual Percentage Rate (APR) of any loan including all fees, points, and charges. Compare the real cost of loans from different lenders side by side.
FEES & CHARGES
Added to balance & accrues interest
Added to balance, no extra interest
Paid cash at closing
REAL APR (Annual Percentage Rate)
6.709%
+0.209% higher than stated rate of 6.5%
MONTHLY PAYMENT
$1,918
TOTAL FEES
$6,500
TOTAL COST
$693,598
COST COMPARISON: WITH vs WITHOUT FEES
| No Fees (Stated Rate) | With Fees (Real APR) | Difference | |
|---|---|---|---|
| Rate | 6.5% | 6.709% | +0.209% |
| Monthly Payment | $1,896 | $1,918 | $22 |
| Total Interest | $382,633 | $393,598 | $10,964 |
| Total Cost | $682,633 | $693,598 | $10,964 |
FEE BREAKDOWN
| Fee Type | Amount | How It Affects Your Loan |
|---|---|---|
| Compounded Fees | $1,500 | Added to principal β you pay interest on these fees |
| Financed Fees | $2,000 | Added to loan balance β increases payment amount |
| Upfront Fees | $3,000 | Paid cash at closing β reduces net loan proceeds |
| Total Fees | $6,500 | = 2.17% of loan amount |
π How APR is Calculated
Loan details
$300,000 at 6.5% for 30 years= Monthly P&I: $1,896
Add all fees
$1,500 compounded + $2,000 financed + $3,000 upfront= $6,500 total fees
Calculate effective loan
$300,000 + $1,500 + $2,000 = $303,500= New monthly: $1,918
Solve for real APR
Newton-Raphson: PV($1,918, r, 360) = $297,000= Real APR: 6.72%
Rate Comparison
Lender A: Low APR
6.60% APR
$4,000 fees | $686K total cost
Lender B: Low Fees
6.75% APR
$2,000 fees | $694K total cost
Lender C: Balance
6.68% APR
$3,000 fees | $690K total cost
APR Limitation: Early Payoff
π‘ What Is APR and Why Does It Matter?
What Is APR?
The Annual Percentage Rate (APR) represents the true annual cost of borrowing money. It combines the interest rate with mandatory fees and charges, expressing the total cost as a single annualized percentage. This standardized metric exists because of the Truth in Lending Act (TILA), which requires US lenders to disclose APR so consumers can make informed comparisons between loan offers.
Without APR, a lender could advertise a 5.5% interest rate while charging $15,000 in fees, making it more expensive than a competitor's 6.0% rate with $2,000 in fees. APR levels the playing field by folding all costs into one number.
Fees Included vs Excluded in Mortgage APR
Fees typically INCLUDED in APR:
- Loan origination fee (0.5-1% of loan amount)
- Discount points (each point = 1% of loan, buys down rate by ~0.25%)
- Mortgage broker fees
- Private Mortgage Insurance (PMI) premiums
- Application and processing fees
- Underwriting fees
- Certain closing costs
Fees typically NOT included in APR:
- Appraisal fees ($300-$600)
- Title search and title insurance
- Survey fees
- Pre-paid items (taxes, insurance escrow)
- Builder warranties
- Home inspection fees
- Recording fees
APR vs Interest Rate vs APY
| Term | What It Measures | Includes Fees? | Includes Compounding? |
|---|---|---|---|
| Interest Rate | Cost of borrowing principal only | No | No |
| APR | Annual cost including fees | Yes | No (simple) |
| APY/EAR | Effective annual rate with compounding | Varies | Yes |
Conversion formula: APY = (1 + APR/n)n β 1, where n = number of compounding periods per year. Example: 10% APR compounded monthly = (1 + 0.10/12)12 β 1 = 10.47% APY.
5 Types of APR
- Fixed APR β Rate stays constant for the loanβs duration. Offers predictability and protection from rate increases
- Variable APR β Fluctuates with a market index (Prime Rate, Federal Funds Rate) plus a lender margin. Starts lower but creates payment uncertainty
- Introductory (Promotional) APR β Temporarily reduced rate (often 0%) on credit cards for 12-21 months. Reverts to standard APR after the promotional period
- Penalty APR β Higher rate triggered by missed payments, typically 25-29.99%. Can apply to existing balances on credit cards
- Cash Advance APR β Rate for credit card cash withdrawals, usually 3-5% higher than purchase APR with no grace period
Limitations of APR
- Assumes full-term payoff β APR spreads upfront fees over the entire loan term. If you pay off early, those fees have a much larger effective impact
- Doesnβt capture all costs β Appraisal, title insurance, inspection, and escrow fees are excluded from mortgage APR
- Variable rate uncertainty β For variable APR loans, the disclosed APR is based on current index rates and may change significantly
- Different calculation methods β Slight differences in how lenders include or exclude certain fees can make comparisons imperfect