Is APR the same as an effective annual rate?

No — this calculator reports a nominal APR (periodic rate × 12), the same convention required on U.S. Truth in Lending Act disclosures, not a compounded effective annual rate (which would be very slightly higher).

Why does a longer loan term shrink the APR gap?

The same fixed dollar fee gets spread over more payments on a longer loan, so it has a smaller proportional effect on the effective rate compared to a shorter loan with the same fee.

Should I always pick the loan with the lowest APR?

It's the standard apples-to-apples comparison for otherwise-similar loans, but also consider how long you'll actually keep the loan — a low-APR loan with high points can still cost more if you refinance or sell early.

Does this include mortgage insurance in the APR?

No — this models only the loan amount, stated rate, and the fees you enter. Real regulatory APR disclosures sometimes include required mortgage insurance; this simplified tool doesn't.

What's the difference between an origination fee and discount points?

An origination fee is a flat lender charge for processing the loan. Discount points are a fee paid to buy down the interest rate itself — both raise your effective APR when rolled in here.

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APR Calculator

The true APR of a loan once origination fees and points are rolled in, vs. the stated rate.

🔒 Runs entirely in your browser — nothing here is ever uploaded

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Last reviewed 2026-08-30

About the APR Calculator

Calculates the true Annual Percentage Rate (APR) of a loan once upfront fees — an origination fee, discount points, or both — are folded in, showing how much higher the real cost of borrowing is than the stated interest rate alone suggests.

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How to use it

Enter the loan amount, stated interest rate, and term in months.
Enter any discount points (% of loan amount) and a flat origination/closing fee.
Read the true APR alongside the stated rate, and how much you'll actually receive after fees.

Formula

Monthly payment is computed from the loan amount and stated rate (standard amortization). The amount you actually receive nets the loan amount against total fees (points % × loan amount, plus any flat fee). True APR is the periodic rate that discounts that same monthly payment stream back to exactly the net amount received, solved numerically (bisection search) and expressed as a nominal annual rate (periodic rate × 12) — the same convention U.S. Truth in Lending Act disclosures use.

Worked example

A $200,000 loan at a 6.00% stated rate over 360 months, with 2 discount points ($4,000): a $1,199.11 monthly payment, $196,000 actually received after fees, and a true APR of about 6.19% — meaningfully higher than the 6.00% stated rate.

Interpreting your result

This computes a nominal APR (periodic rate × 12), matching Regulation Z's disclosure convention — not an effective/compounded annual rate, which would be slightly higher. The gap between stated rate and APR shrinks the longer the loan term, since the same upfront fee spreads over more payments. This doesn't model a variable-rate loan, mortgage insurance, or fees some official APR disclosures exclude (like a one-time appraisal fee). Not financial advice.

Recommendations

• Always compare loan offers by APR, not just the stated rate — a lower stated rate with more points can have a higher true APR than a slightly higher rate with no points.
• The APR gap from a fixed fee shrinks over a longer loan term, since the fee is amortized over more payments — the same points cost more in APR terms on a 15-year loan than a 30-year loan.
• Discount points are usually only worth it if you'll keep the loan long enough for the lower monthly payment to offset the upfront cost — see the Mortgage Points Calculator for that break-even math specifically.

Frequently asked questions

APR folds in upfront fees (points, origination fees) by finding the rate that would produce the same payment if you'd only received the loan amount minus those fees — the stated rate ignores fees entirely.