APR Mortgage calculator
Your note rate ignores fees; the APR folds them in. Enter your points and closing fees to see the true annual cost of your mortgage.
A worked example
Running this tool on current national benchmarks (Federal Reserve / Freddie Mac via FRED (St. Louis Fed)) — swap in your own numbers to see how the result moves.
- Loan amount
- $300,000
- Note interest rate
- 6.50%
- Loan term (years)
- 30
- Discount points
- 1
- Other closing fees
- $2,500
versus a 6.50% note rate
- Note rate6.50%
- APR6.679%
- Points cost$3,000
How the effective APR changes with loan amount
Holding the other inputs at the example above, here is how the result moves as loan amount changes.
| Loan amount | Effective APR | Note rate |
|---|---|---|
| $150,000 | 6.762% | 6.50% |
| $225,000 | 6.706% | 6.50% |
| $300,000 | 6.679% | 6.50% |
| $450,000 | 6.651% | 6.50% |
| $600,000 | 6.638% | 6.50% |
The math behind it
Your note rate sets your monthly payment, but it ignores the fees you pay to get the loan. This calculator adds the cost of your discount points (points times 1% of the loan) to your other closing fees, then solves for the single annual rate — the APR — that accounts for borrowing the loan amount net of those fees and repaying it over the full term. That APR is the number lenders must disclose so you can compare offers on equal footing.
Assumptions & limits
- One discount point costs 1% of the loan amount. Points plus your other fees make up the total finance charge used in the APR.
- Every fee you enter is assumed to be a finance charge amortized across the entire term. In reality, which fees count toward APR is defined by regulation and varies slightly by lender.
- The APR assumes you keep the loan for the full term. Pay it off or refinance early and your effective cost is higher, because the upfront fees are spread over fewer years.
- The monthly payment shown reflects the note rate, not the APR. Taxes, insurance, and any mortgage insurance are excluded.
How discount points work
Points are prepaid interest. The rate reduction per point varies by lender and market.
| Term | Meaning |
|---|---|
| 1 discount point | Costs 1% of the loan amount, paid at closing |
| Typical rate cut | Roughly 0.25% off the rate per point, though it varies |
| Break-even | Months of payment savings needed to recoup the points cost |
Source: Freddie Mac PMMS via FRED. Annual averages; latest weekly reading shown.
Common questions
What is the difference between the interest rate and the APR?
The interest rate — the note rate — determines your monthly principal and interest payment. The APR is broader: it folds in points and lender fees to express the loan's yearly cost as one percentage. The APR is always at least as high as the note rate, and the gap between them reflects your upfront costs.
Is the loan with the lowest APR always the best deal?
Only if you keep the loan for the full term. Because APR spreads fees over the whole term, a low-APR loan with high upfront fees can lose to a higher-APR, lower-fee loan if you sell or refinance in a few years. Match the comparison to how long you actually expect to hold the loan.
Do points always lower my APR?
Points raise your upfront cost but lower your rate, and the net effect on APR depends on the trade. Buying points can reduce the APR when the rate cut is large enough to outweigh the added fee over the term. This calculator lets you enter points and fees separately so you can see the combined result.