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Profile picture for nataliapl

What is the difference between Interest rate and APR on refinance loan?

I got 4.875% interest rate, but my APR is 5.25%
  • April 29 2009 - San Francisco
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Answers (7)

Profile picture for Nate
nataliapl,
I just created a blog post explaining the difference between interest rate and APR on the Zillow Mortgages Unzipped blog.  I recommend you check it out. 
I hope it helps.
Thanks,
Nate
  • May 01 2009
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nataliapl, if you are not paying mortgage insurance and are doing a conventional loan, you will be paying 4 points in fees that apply to the APR. If you are doing an FHA loan or a conventional loan with MI, the APR will be higher than what they are telling you. APR on an FHA loan would be 5.538% BEFORE any fees like origination or discount points are factored in. A conventional loan at 81-85% loan to value would have an APR of 5.349% BEFORE any fees were added. This is not a Zillow lender, correct? If an appraisal is being used, what is the value of your property? Are you doing an FHA, Conv, or VA loan? 
  • April 30 2009
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Profile picture for Rob Cochems
The interest rate, is the actual rate of interest you will be paying on the money borrowed.  The APR is designed to reflect the total costs of borrowing.  The APR takes into affect your rate and certain costs associated with the loan, i.e. origination fees, processing fees so forth.

In comparing loan quotes I would be more concerned with comparing the interest rate and total closing costs with each lender.
  • April 29 2009
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Profile picture for Arla
  • Arla
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In theory it's the amount you will be paying total, so my guess is you have a number of points on that loan which is why the APR is high.
  • April 29 2009
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APR is the cost of your loan expressed in a percentage rate. Costs are fees such as processing, underwriting, points, title fees, etc etc. If the cost to complete the loan was $0 then the note rate and the APR would be exactly the same.
  • April 29 2009
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Profile picture for nataliapl
It's 30 years fix for 445000
  • April 29 2009
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Profile picture for Rob Cochems
Out of curiosity can you let me know your loan amount and the term, i.e. 15 or 30 year fixed?
  • April 29 2009
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