How does refinancing affect real APR?

Refinancing can lower your note rate but still increase your real APR if the closing costs are high or if you refinance again before reaching break-even. Modeling the holding period is key.

What’s a good way to compare mortgage offers?

Compare offers with the same loan type and term, then evaluate total fees, points, and your expected holding period. Use real APR to make an apples-to-apples comparison across lenders.

What Is the Real APR of My Mortgage?

Q: What is the real APR of a mortgage?

Real APR is an effective borrowing rate based on your actual costs (points, lender fees, and timing) over the period you expect to keep the loan. Unlike standard APR, real APR can be modeled for a 5-, 7-, or 10-year holding period using an IRR calculation.

Q: Why is APR higher than my interest rate?

APR is often higher because it includes certain prepaid finance charges such as discount points and lender fees, spreading those upfront costs over time as an annualized percentage.

Q: Does APR include property taxes and homeowners insurance?

No. Mortgage APR generally does not include property taxes or homeowners insurance. It focuses on the cost of borrowing: interest plus certain loan fees.

Q: Are mortgage points worth it?

Points can be worth it if you keep the loan long enough to break even. The break-even period is usually calculated by dividing the point cost by monthly payment savings. Real APR modeling helps confirm whether points are truly beneficial for your timeline.

Real APR mortgage calculations show the true cost of your home loan, not just the advertised interest rate. If you’re comparing lender quotes with different points and fees (or you expect to refinance or move), a standard APR disclosure can miss what matters most: your real timeline.

On this page, we use an IRR-based Real APR calculator that models points, lender fees, whether you roll fees into the loan, and how long you expect to keep the mortgage. Then you can compare offers using today’s rate table.

Compare Current Mortgage Rates (Lenders & Offers)

Start by scanning lenders, then use the Real APR calculator below to compare fees and points the right way.

Tip: open 2–3 offers and compare real APR, not just rate.

If you’re refinancing, jump to our refinance calculator and then come back here to measure your new offer’s real APR against what you have today.

Real APR Calculator

We estimate Real APR by modeling cash flows (net proceeds, monthly payments, and payoff at exit) and solving for the monthly IRR, then converting it to an effective annual rate.

Loan details

Loan amount

Interest rate

Term (years)

Holding period (years)

Points & lender fees

Points are a percentage of the loan amount. Lender fees are entered as dollars.

Points

Lender fees

How are fees paid?

This impacts Real APR because it changes your cash received at closing and/or the payment calculation.

Results

Net proceeds (t=0)

$393,500.00

Principal used

$400,000.00

Points cost

$4,000.00

Lender fees

$2,500.00

P&I payment (mo)

$2,594.39

Holding period

7 yrs (84 mo)

Balance at exit

$363,149.89

Interest paid (to exit)

$181,078.85

Real APR (IRR-based)

7.29%

Effective annual rate based on your cash flows and holding period.

Points break-even (quick view)

This is a simplified break-even estimate using payment difference only.

Note: Real APR modeling focuses on the cost of borrowing. It does not include property taxes, homeowners insurance, HOA, or maintenance.

How to use these results

If two offers have similar rates but different points, Real APR helps you see which is cheaper for your timeline.
If you expect to refinance or move, test 5–10 year holding periods instead of assuming the full term.
After you pick a shortlist, compare lenders again using the rate table near the top of this page.

Real APR Mortgage Guide: Rate vs APR vs Real APR

Mortgage offers can look “cheaper” or “more expensive” depending on how the lender structures points and fees. A lower note rate with higher points might be a great deal if you keep the loan long enough, or a bad deal if you refinance or sell within a few years.

Interest rate vs APR (and why “real APR” matters)

Interest rate drives your monthly principal-and-interest payment.
APR adds certain prepaid finance charges (like points and some lender fees) and expresses the cost as an annualized rate.
Real APR estimates your effective cost for your actual timeline, such as 5–10 years, using IRR-style modeling.

Why APR is higher than your mortgage rate

APR is usually higher because it includes upfront borrowing costs like discount points and certain lender fees. These costs are “spread” over time as an annualized percentage, which helps compare loans, but also assumes you keep the mortgage for a long period.

What “real APR” captures that standard APR can miss

Your holding period (how long you keep the loan before selling/refinancing)
Whether points/fees are paid upfront or rolled into the loan
The remaining balance you pay off when you exit the loan
The fact that many borrowers refinance or move long before the end of the term

Are mortgage points worth it?

Points can make sense when you expect to keep the loan long enough to break even. Use the calculator above to compare a “higher rate / no points” offer against a “lower rate / points” offer for your timeline.

How to compare offers the right way

Compare the same loan type and term (example: 30-year fixed vs 30-year fixed).
Match points and fees to the quote, not just the advertised rate.
Set your expected holding period (5, 7, 10 years) and compare Real APR.
Use the rate table above to pull multiple offers before locking.

Next steps

If you’re still deciding between offers, try our mortgage payment calculator to compare monthly cost, then use this Real APR calculator to see which loan is cheaper for your timeline.

FAQs

What is the real APR of a mortgage?

Real APR is an effective rate based on your actual borrowing costs over the period you expect to keep the loan. It’s especially helpful when comparing points, lender fees, and refinance timelines.

Why is APR higher than my interest rate?

APR includes certain prepaid finance charges (like points and some lender fees) in addition to the interest rate, expressed as an annualized percentage.

Does APR include taxes and insurance?

No. APR generally does not include property taxes or homeowners insurance. It focuses on the cost of borrowing.

Are mortgage points worth it?

They can be if you keep the loan long enough to break even. Real APR modeling helps confirm whether points reduce your effective borrowing cost for your timeline.

What’s the best way to compare mortgage offers?

Compare the same term and loan type, then evaluate points, fees, and your expected holding period using Real APR.