The APR is the annual cost of a loan to a borrower. Like an interest rate, an APR is expressed as percentage. Unlike an interest rate, however, it includes other charges or fees (such as mortgage insurance, most closing costs, points and loan origination fees) to reflect the total cost of the loan. As a result, APR is higher than the interest rate. Since all lenders must follow the same rules to ensure the accuracy of the APR, you can use the APR as a good basis for comparing certain costs of loans. (Remember, though: Your monthly payment is not based on APR, it's based on the interest rate on your promissory note.) Learn more about APR vs. interest rate See all home loans FAQs