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Rates

Understanding rates & APR.

Two numbers show up on every mortgage offer, and they’re not the same. Knowing the difference is how you compare lenders fairly — and spot a teaser.

Interest rate: the cost of the money

Your interest rate is the percentage you pay on your loan balance each year. It drives your principal-and-interest payment. A lower rate means a lower monthly payment for the same loan amount — which is why it gets all the attention.

APR: the fuller cost of the loan

The APR (annual percentage rate) rolls certain costs of getting the loan — like points and specific lender fees — into a single yearly percentage. Because it captures more than the rate alone, APR is usually a bit higher than the interest rate, and it’s the better number for comparing two offers.

Here’s the key habit: compare APR to APR. A lender can advertise a low rate but load up on fees; the APR is where that shows up. Two offers with the same rate can have very different APRs.

What “points” are

Discount points are optional fees you pay up front to lower your rate. One point equals 1% of the loan amount. Paying points can make sense if you’ll keep the loan long enough to recoup the cost through lower payments — the same break-even idea as a refinance. Prefer to keep cash? You can often take a slightly higher rate in exchange for lender credits toward closing costs. It’s a trade-off, and there’s no universally “right” answer — only what fits your plans.

Fixed vs. adjustable

  • Fixed rate: the rate stays the same for the life of the loan. Predictable — the most common choice.
  • Adjustable rate (ARM): a lower fixed rate for an intro period, then it can adjust with the market. Can fit shorter-horizon plans, but understand the reset before you sign.

Why your quote isn’t the headline rate

Advertised rates usually assume an ideal borrower and specific conditions. Your rate reflects your credit, down payment, loan type, property, and the market that day. That’s why we focus on an honest, personalized quote rather than a billboard number — see how rates are set for the full picture.

Which number should I compare between lenders?
APR, with the same loan type, term, and points assumptions. It captures rate plus certain fees, so it’s the fairest apples-to-apples comparison.
Is the lowest rate always the best deal?
Not always. A low rate bought with points and fees can cost more overall than a slightly higher rate with fewer costs — especially if you move or refinance before you break even.
Should I pay points?
Only if you’ll keep the loan past the break-even point. Your officer can run that math for your situation.

Remember: the rate sells the loan; the APR tells the truth. Compare APR to APR, and ask what assumptions each quote is built on.

General education, not financial advice or a commitment to lend. Rates, APRs, and points change with the market and your specific situation.

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