Mortgage APR Calculator
This mortgage APR calculator with points and fees computes the true annual percentage rate for up to two loan offers side by side, then shows the real break-even point between them. A lower APR isn’t automatically the better deal if you won’t keep the loan long enough to recoup higher upfront fees, and this tool shows you exactly where that line falls. For your full monthly payment including taxes and insurance, see our full Mortgage Calculator.
Skip straight to the calculator ↓Your Loan Details
Compare Two Loan Offers
Enter the note rate and total fees included in APR for each offer. If you only have one offer, just fill in Offer A.
Your Results
Enter both offers above to see which one actually costs less, and at what point.
Total Cost by How Long You Keep the Loan
APR assumes you keep the loan for its full term. Most people don’t. This table shows which offer actually costs less depending on how many years you stay in the loan before selling or refinancing.
| Time horizon | Offer A total cost | Offer B total cost | Cheaper option |
|---|
What APR Actually Measures, and Why It’s Not Your Interest Rate
Your note rate is what your monthly principal and interest payment is based on. APR, the annual percentage rate, is a different, always-higher number that spreads certain upfront fees across the life of the loan and expresses the whole package, rate plus those fees, as a single annualized cost. Two loans with the identical note rate can have very different APRs if one carries higher origination fees or discount points, which is exactly why federal law requires lenders to disclose APR on every Loan Estimate: it’s meant to be the number you use to compare offers apples to apples.
How This Calculator Computes APR
There’s no simple formula that solves for APR directly, because it requires finding the interest rate at which the present value of your scheduled payments equals the loan amount minus the fees financed into the APR. This calculator does exactly what that requires: it computes your monthly payment from the note rate, then solves iteratively for the rate at which that payment stream’s present value equals your loan amount minus fees. That solved rate, annualized, is your APR. It’s the same present-value logic Regulation Z requires lenders to use, not an approximation.
What Fees Actually Go Into APR
Under Regulation Z, APR is meant to capture finance charges: things like the loan origination fee, discount points, mortgage insurance premiums required by the lender, and prepaid interest. It generally does not include fees for services that are the same regardless of which lender you choose, like the appraisal, credit report, title insurance, or recording fees, since those are considered bona fide third-party charges rather than the cost of the loan itself. That’s part of why comparing APRs from different lenders can still miss real differences in total closing costs, which is exactly why the total cost comparison table above looks at actual dollars, not just the APR percentage.
Why the Lower APR Isn’t Always the Better Deal
APR assumes you’ll keep the loan for its entire term. In practice, most homeowners sell or refinance well before then. If Offer B has a lower rate purchased with more upfront points, it will show a lower monthly payment but a real cost that takes years to catch up to and beat a lower-fee offer with a slightly higher rate. The Total Cost by How Long You Keep the Loan table above is built specifically to answer the question APR alone can’t: which offer is actually cheaper for the amount of time you realistically expect to hold this loan.
When Paying Points Actually Pays Off
A discount point typically costs 1% of the loan amount upfront and buys down your rate by a fraction of a percent, though the exact tradeoff varies by lender and market conditions. Paying points tends to make sense if you’re confident you’ll hold the loan past the break-even point shown above, and tends not to make sense if you expect to move, sell, or refinance again within a few years, since the upfront cost may never fully pay for itself in reduced interest.
Frequently Asked Questions
What is a mortgage APR calculator?
A tool that computes the annual percentage rate of a loan by factoring in both the note interest rate and upfront finance charges like origination fees and discount points, expressed as a single annualized rate.
Why is APR higher than my interest rate?
APR spreads certain upfront fees, such as origination charges and discount points, across the life of the loan and folds them into an equivalent annualized rate, which is always at or above the note rate whenever any such fees are charged.
What fees are included in APR?
Generally the loan origination fee, discount points, lender-required mortgage insurance, and prepaid interest. Third-party fees for services like the appraisal, credit report, and title insurance are usually excluded.
Is a lower APR always the better loan?
Not necessarily. APR assumes you keep the loan for its full term. If you expect to sell or refinance sooner, an offer with a slightly higher APR but lower upfront fees can end up costing less in practice, which is why comparing actual total cost at your expected holding period matters more than the APR percentage alone.
How do I calculate APR by hand?
You solve for the interest rate at which the present value of your monthly payments equals your loan amount minus the fees financed into the APR. There’s no closed-form formula; it requires an iterative or trial-and-error approach, which is what this calculator automates.
Do discount points always pay off?
Only if you keep the loan long enough to pass the break-even point where the accumulated monthly savings from the lower rate exceed the upfront cost of the points. If you sell or refinance before then, points can end up costing you more than they saved.
Does this calculator include property tax and insurance?
No, this tool focuses specifically on comparing loan pricing through APR and total cost. For a full monthly payment estimate including property tax, insurance, and PMI, use the full Mortgage Calculator linked above.
References
- Consumer Financial Protection Bureau, Owning a Home resources – consumerfinance.gov/owning-a-home
- U.S. Department of Housing and Urban Development, homebuying guidance – hud.gov/topics/buying_a_home
Related DexoCalc Tools
This APR calculator is one piece of a wider mortgage planning toolkit on DexoCalc.
State Mortgage Calculators
Once you’ve settled on a rate and fees, want the full monthly payment picture for a specific state, including local property tax? These calculators use real local tax data:
This calculator provides estimates for educational purposes only and is not a loan offer, pre-approval, or substitute for the official APR disclosed on your lender’s Loan Estimate and Closing Disclosure. Actual APR depends on the exact fees your specific lender classifies as finance charges, which can vary by lender.