RCB Bank Learning Center - Mortgage interest apr

A lot goes into the decision to buy a house, and so does the decision to take out a mortgage to pay for that home. Having a good understanding of what all your mortgage entails will take some of the mystery out of the process.

There are various costs associated with a mortgage, including:

  • Interest rate
  • Points (Or discount points; With these you pay more upfront, but receive a lower interest rate and end up paying less over time)
  • Fees
  • Other charges

There is a cost you will pay each year to borrow the money for your home. According to the Consumer Financial Protection Bureau, that is the interest rate, which is expressed as a percentage. The interest rate only reflects the cost of borrowing the money for your home.

An annual percentage rate (APR) reflects your interest rate, but also includes any points, mortgage broker fees and other charges involved in the cost of the loan. Therefore, your APR is usually higher than your interest rate.

The CFPB advises caution when comparing loan options, and to be sure you understand differences between the terms being offered. As just one example, the APR of a closed-end loan includes fees, but the APR of a home equity line of credit does not.

Opinions expressed above are the personal opinions of the author and meant for generic illustration purposes only. With approved credit. For specific questions regarding your personal lending needs, please call RCB Bank at 855-BANK-RCB. Some restrictions apply. RCB Bank is an Equal Housing Lender and member FDIC. RCB Bank NMLS #798151.