Compute true APR including all fees and points.
True APR (with fees)
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Monthly payment
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Net proceeds (loan - fees)
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Your breakdown
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Rate and APR are not the same promise
The interest rate a lender quotes describes only the cost of the money itself. The annual percentage rate, or APR, folds in the fees you pay to get that money: origination charges, discount points, broker fees, and certain closing costs, all spread across the life of the loan. Federal Truth in Lending rules require lenders to disclose APR precisely so borrowers can compare offers on one honest yardstick. A loan with a tempting low rate and fat fees can easily carry a higher APR than a loan with a slightly higher rate and no fees, which is exactly the trap this calculator is built to expose.
How the solver backs into the true rate
The tool starts with your loan amount, nominal rate, and term, and computes the monthly payment the lender will actually charge. Then it asks a sharper question: what rate would produce that same payment if you had only received the loan amount minus the fees, since the fees never reach your pocket? It searches for that rate with a binary-search loop, narrowing the range until the payment matches. The answer is the APR. Because your payment is fixed but your net proceeds are smaller, the effective rate has to be higher than the quoted one, and the difference is the pure cost of the fees.
A 400,000 dollar mortgage with 8,000 in fees
Use the defaults: a $400,000 loan at a 6.5 percent nominal rate over 30 years, with $8,000 of upfront fees. Here is what the calculator reports.
You make payments as though you borrowed $400,000, but only $392,000 of value actually reached you. Solving for the rate that reconciles those two facts gives 6.695 percent. The $8,000 in fees adds about 0.195 of a percentage point to your real borrowing cost, a difference that is invisible if you compare quoted rates alone.
The mistake that wastes the comparison
APR assumes you keep the loan for its full term, and that assumption quietly breaks the comparison for most borrowers. The typical homeowner refinances or sells within about seven to ten years, long before a 30-year clock runs out. Because APR spreads those upfront fees across all 360 payments, it understates the real cost of fees when you pay the loan off early. If you expect to move soon, a no-fee loan at a slightly higher rate often beats a low-rate loan loaded with points, even though its APR looks worse. Use APR to compare offers of similar structure, then sanity-check the winner against how long you actually plan to hold the loan. APR is a powerful shortcut, not the whole decision.
Which fees belong in the APR?
Finance charges that are a condition of getting the loan belong in APR, which on a mortgage typically means origination fees, discount points, mortgage broker fees, and certain underwriting and processing charges. Costs you would pay regardless, such as a home appraisal, title insurance you shop for, or recording fees, are generally excluded. Lenders do not all draw the line in exactly the same place, so when two APRs are close, ask each lender for an itemized fee list rather than trusting the single number.
Does a lower APR always mean a better loan?
Not necessarily. A lower APR usually signals lower lifetime cost only if you hold the loan to term and the loans share the same term length. Comparing a 15-year APR to a 30-year APR is meaningless, and a low APR achieved by paying points upfront can be a poor deal if you plan to refinance in a few years. Match the term, weigh the points against your expected holding period, and then let APR break the tie.