What is the difference between the interest rate and the A.P.R.?  You'll see an interest rate and an Annual Percentage Rate (A.P.R.) for each mortgage loan you see advertised. Federal law requires the lender to tell you both.
The A.P.R. is a way for comparing different loans, which will include different interest rates but also different points and other terms. The A.P.R. is designed to represent the "true cost of a loan" to the borrower; this is expressed in the form of a yearly rate. While it's designed to make it easier to compare loans, it's sometimes confusing because the A.P.R. includes some, but not all, of the various fees and insurance premiums that accompany a mortgage. And since the federal law that requires lenders to disclose the A.P.R. does not clearly define what goes into the calculation, A.P.R.s can vary from lender to lender and loan to loan. The A.P.R. on a loan tied to a market index, like a 5/1 ARM, assumes the market index will never change. But ARM’s were invented because the market index changes and makes fixed rate loans cheaper or more expensive to make. So, A.P.R.s are at best inexact. The lesson is, that A.P.R. can be a guide, but you need a mortgage professional to help you find the truly best loan for you. Remember that the A.P.R. will not tell you about balloon payments or prepayment penalties, or how long your rate is locked. A mortgage professional is trained specifically in informing you with that information. Also, you'll see that A.P.R.s on 15-year loans will carry a higher relative rate due to the fact that points are amortized over a shorter period of time.
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Interest Rate vs. A.P.R. 
