Definition
The total yearly cost of a mortgage expressed as a percentage, including the interest rate plus fees like origination costs and mortgage insurance. APR is always higher than the interest rate and gives a more complete picture of what you're actually paying.
Related Costs & Fees Terms
Fees and expenses paid at closing, typically 2–5% of the loan amount. They include the appraisal, title insurance, origination fees, prepaid interest, property taxes, and government recording fees.
Prepaid interest paid at closing to permanently lower your mortgage rate. One point equals 1% of the loan amount and typically reduces your rate by 0.25%. Buying points makes financial sense if you plan to stay in the home long enough to recoup the upfront cost.
An account held by your loan servicer to collect and pay property taxes and homeowner's insurance on your behalf. A portion of your monthly mortgage payment goes into escrow each month so the bills are covered when they come due.
A fee charged by the lender for processing, underwriting, and funding your mortgage. Origination fees are typically 0.5–1% of the loan amount and are sometimes negotiable, especially when working with a broker.
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