APR calculator

How to use this calculator

Read the full guide: APR and points guide

How it works

Enter loan amount, note rate, term, discount points, and lender fee buckets. The tool computes monthly P&I at the note rate, prepaid finance charges, and a simplified APR using an amount-financed approach (loan minus certain upfront finance charges). Charts compare note rate vs APR and show cumulative interest.

Worked example

Example: $400,000 loan, 6.5% note, 30 years, 1 point ($4,000), $2,500 origination. Monthly P&I about $2,528. Prepaid finance charges $6,500. Simplified APR might land near 6.65% to 6.75% depending on rounding, higher than the note rate because fees are spread across the loan term in the APR calculation.

Two different rates, two different jobs

The note rate is what your payment is built from. It is the number in the amortization math, and it is the only one of the two that determines what you send the servicer each month. The APR is a disclosure figure: it takes the note rate and folds in the upfront finance charges, then expresses the whole package as a single annualized percentage.

That makes APR genuinely useful for one specific job, which is catching a lender who advertises a low rate and recovers it through fees. If one quote shows 6.5 percent with a 6.55 percent APR and another shows 6.375 percent with a 6.9 percent APR, the second lender is charging materially more upfront, and APR surfaced it.

What APR cannot do is tell you which loan is cheaper for you, because the calculation assumes you keep the loan for its full term. Almost nobody does. The median homeowner moves or refinances long before year 30, and that single assumption is why the lowest-APR offer is frequently not the best offer.

Whether points are worth buying

A discount point costs 1 percent of the loan amount and typically buys down the rate by somewhere between 0.125 and 0.25 percent, with the exact tradeoff set by the lender and the day's pricing. On the $400,000 example, one point is $4,000.

The test is a break-even, and it is simple. If $4,000 lowers your payment by $65 a month, you recover the cost in about 62 months, a little over five years. Keep the loan longer than that and the points were a good trade. Sell or refinance in year three and you paid $4,000 to save roughly $2,340.

Two things usually decide it. The first is how long you will genuinely keep this loan, which is a judgment call about your life rather than the market. The second is whether rates are more likely to fall: paying for a permanently lower rate is less attractive if you would refinance into something better in two years anyway. Points are also potentially tax-deductible as prepaid interest on a purchase, which is worth asking a tax professional about rather than assuming.

Lender credits run the same math backwards

Negative points, usually called lender credits, are the mirror image. You accept a rate above par and the lender pays some of your closing costs. A quote of 6.875 percent with a $4,000 credit instead of 6.5 percent at par means you are financing the fees through a higher rate for as long as you hold the loan.

This is often the right choice, and not just for people short on cash. If you expect to refinance within a few years, or you would rather keep the $4,000 in reserves after closing, taking the credit is a rational trade. Reserves are also a compensating factor in underwriting, so cash kept can indirectly help your approval.

When you enter credits in this tool, make sure the sign is right. A credit reduces prepaid finance charges, which pulls APR down toward or even below the note rate relationship you would otherwise expect.

Comparing offers the way that actually works

The reliable method is not APR shopping. Ask every lender for zero-point pricing on the same loan amount, same term, and same lock period, all quoted on the same day, since pricing moves daily. That gives you a clean baseline comparison of rate and fees.

Then decide points separately, once you have chosen a lender, based on your own hold period. Mixing the two decisions is how borrowers end up comparing a 15-day lock with two points against a 45-day lock with none and concluding something that is not true.

Finally, confirm everything on paper. The APR this tool produces is educational and simplified; it is not a Regulation Z calculation, and different lenders include slightly different fees. Page two of the Loan Estimate is the authoritative list. Use the offer comparison workspace to rank real quotes side by side, and read APR and points for the full treatment.

What this calculator does not include

• Not a Regulation Z compliant APR for disclosures.
• May not include all fees your lender counts in APR vs cash to close.
• Does not model adjustable rates after the fixed period.
• Assumes you keep the loan full term for APR math even if you will move sooner.
• Lender credits (negative points) need correct sign in your inputs.

Frequently asked questions

Why is APR higher than the note rate?

APR spreads upfront finance charges over the loan term. Points and origination commonly raise APR above the note rate.

Should I pick the lowest APR offer?

Only if you will keep the loan long enough for points to pay off. Compare cash to close and payment for your hold period.

Does APR include title insurance?

Often partially, depending on what is finance-related in your disclosure. Use Loan Estimate line items for decisions.

How accurate is this APR?

Educational. Your lender APR on the official disclosure is authoritative.

Can I compare a refi here?

Yes for rough comparison. Refinance break-even also needs closing costs and timeline; see the refinancing Learn guide.

Educational tool only. Not a Loan Estimate, appraisal, tax advice, or legal opinion. Numbers are illustrative unless you enter your own verified inputs.