Annual Percentage Rate (APR) Calculator

About this Calculator

Calculates the APR of a loan, such as a mortgage, including additional fees or points rolled into the amount borrowed.

What is APR?

The annual rate that is charged for a loan, representing the actual yearly cost of a loan. This includes any fees or additional costs associated with the loan such as closing costs or points.

If you take a mortgage for $100,000 at an interest rate i with no additional fees then i is likely your APR.  However, if you have additional fees rolled into the loan, your APR will be higher than the stated interest rate i.

APR Example

Suppose you lend me $20 for a year at 10% interest.  At the end of the year I will owe you 20 + (20 x 10%) = 20 + 2 = $22. Now, 2/20 = 0.10 or the APR is 10%.

Now suppose you lend me $20 for a year at 10% but you are also charging me a $2 fee for all the paperwork.  And, I can pay you the fee at the end of the year. At the end of the year I will owe you 20 + (20 x 10%) + 2 = 20 + 2 + 2 = $24. Now, 4/20 = 0.20 or the APR is 20%.

Mortgage APR Example:

Suppose you take out a 30 year mortgage for $100,000 at an annual interest rate of 6%.  The actual cost for the loan is 6% per year interest rate on the balance.

Now suppose you have additional closing costs of $4000 and you roll that amount into the mortgage loan.  Now, you are getting $100,000 from the mortgage lender however, the balance you owe them is $104,000.

Instead of making monthly payments of $A on a full loan of $100,000 and getting $100,000, you are making higher monthly payments of $B on a full loan of $104,000 and still only getting $100,000.  Stating it differently, instead of paying $A/month to get $100,000, you are paying $B/month to get $100,000.  Since $B is higher than $A, the rate you are paying with $B will also be higher than the rate you would have paid with $A, the 6% above.