What is the difference between interest rate and APR?

A mortgage interest rate is the rate at which interest is charged on a home loan. It is the cost of borrowing money, expressed as a percentage of the loan amount. The interest rate is typically fixed, meaning that it remains the same throughout the life of the loan, or variable, meaning that it can change over time.

Annual Percentage Rate (APR) is a broader measure of the cost of borrowing money that includes not only the interest rate, but also certain other costs associated with the loan, such as origination fees, discount points and mortgage insurance. The APR is expressed as a percentage and is meant to help borrowers compare the costs of different loans. However, it is important to note that APR does not include many non-lender costs that CapCenter waives in its Zero Closing Costs mortgages. Also, there are ways to structure the loan to lower the APR that are not ideal for the borrower. CapCenter's APRs are very competitive, but we recommend looking further than APR to understand CapCenter's full savings story.

While APR does give a better picture of the overall cost of the loan, lower APRs can be associated with higher upfront fees (e.g. mortgage discount points) or higher non-lender fees. CapCenter recommends potential clients to compare the comprehensive closing costs and terms of the loan for a better apples-to-apples comparison.