I’m starting to pay attention to mortgage loan advertisements now. Most of them include both a Rate and and APR. But what’s the difference?

The mortgage rate is the amount of actual interest charged. It’s usually a round number like 5.75% or 6.0%. So if you have a loan amount of $200,000 and a rate of 5%, you would be charged $10,000 of interest the first year. But the cost of a mortgage involves a lot more than just the rate. There are origination fees, loan discount points, private mortgage insurance, etc.

The mortgage APR, or annual percentage rate, includes both the interest and certain other loan fees. Although it was designed to make it easier to compare different mortgages offered by different lenders, it ...