Categories: MortgageReal Estate

Consider APR when shopping for a mortgage, experts say

Mortgage rates at their current record lows offer some serious savings for both home buyers and people looking to refinance.

But experts say a low mortgage rate is only one part of the equation, as people also need to consider the loan’s annual percentage rate to take into account other costs such as upfront fees.

The financial website NextAdvisor notes that once additional fees have been factored in, a buyer with a 30-year fixed-rate mortgage with 2.9% annual interest may actually be paying at a rate of 3.1%. Buyers need to be aware of this, experts say.

Linda Knowlton, president of the Florida Association of Mortgage Professionals, told NextAdvisor that the annual percentage rate is confusing for many people. “It’s the broader measure of the cost of borrowing money than the interest rate,” she said.

The issue is that mortgages come with upfront fees that aren’t included within the interest rate. The cited mortgage rate refers to the percentage of what the buyer is paying to borrow the cash. But the APR factors in the interest rate together with the fees, which including closing costs, underwriting costs and loan processing fees. The confusion arises from the fact that both the interest rate and the APR are expressed as a percentage.

APR fees can vary from lender to lender and also from state to state, Knowlton pointed out. So two mortgages might have the same interest rate, but come with a different APR.

Experts say buyers shouldn’t consider the APR alone though, as it doesn’t take into account how long they plan to keep the loan and stay in their home for, and those factors can also influence the overall terms.

“Looking at a loan’s interest rate or APR can help you analyze different mortgages,” NextAdvisor advises. “But you can’t stop there because there are factors that those numbers don’t take into consideration.”

Mike Wheatley

Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at

Recent Posts


Industry Coach Tom Ferry Headlines Event JPAR® – Real Estate, America’s #1 fastest-growing, 100% commission…

3 hours ago

Who You Hire Matters: Coltyn Simmons and Custom Fit Real Estate are Changing the Home Buying and Selling Industry

Reputation in real estate is everything. The team at Custom Fit Real Estate will tell…

5 hours ago

Workforce Planning: Definition, Benefits, and Steps

Workforce planning can help you meet organizational goals in any economy. It’s been a challenging…

8 hours ago

Ask Brian: Should Equity Rich Baby Boomers Cash Out?

Ask Brian is a weekly column by Real Estate Expert Brian Kline. If you have…

12 hours ago

Talking to Sellers: Are We at the Top of the Market?

We spoke to Aaron Drussel, Broker/Owner of Better Homes and Gardens Real Estate Momentum in…

12 hours ago

Why Real Estate CRM Software is Important for Agents

Managing your interactions with customers and clients can be an exhausting job. If you're a…

12 hours ago