A measure of the cost of credit, expressed as a yearly rate. It includes interest as well as other charges. Since all lenders are supposed to follow the same rules to ensure the accuracy of the annual percentage rate, it provides borrowers with a good basis for comparing the cost of loans, including mortgage plans.
The APR is similar to the Unit Price used by supermarkets to give borrowers a benchmark by which they can compare similar products. Because APR takes into account the closing costs associated with a loan, it will almost always be higher than your actual note rate. Also, different lenders include different items when they calculate APR. This sometimes makes it difficult to use APR as an accurate basis for comparison. For more information, click here.