Unsure of what an APR is? Can’t see the difference between an APR and an interest rate? These are important terms to understand, as they are key components of the mortgage process.
First off, lets discuss what an APR is, and why it is important to the mortgage process. An APR can best be defined as the actual cost of the mortgage that is spread out over a 30-year time period. For example, when you go to get your mortgage, the interest that is being charged to you is your note rate, so whatever is on the note of your mortgage is what you are being charged.
There are certain costs associated with getting a mortgage, like an appraisal or a survey, among other things. These costs are required to be disclosed as a percentage of the rate, which is why you see an APR and an interest rate. It is important to remember when discussing these topics that you are only paying interest on the actual interest rate.