APR Calculator for Adjustable Rate Mortgages Overview

The annual percentage rate (APR) is defined as an annualized cost of credit. When it comes to mortgage financing the APR is the actual rate of interest that is paid by the borrower when upfront costs such as points, closing costs, and prepaid interest are included. By law, a mortgage lender must disclose the APR to borrowers when quoting the interest rate. Because the APR includes other costs besides the actual amount of the mortgage, it is higher than the interest rate that is used to calculate monthly mortgage payments.