APR Calculator
Points and fees are paid at closing but raise what the loan really costs. Enter the loan, the rate and the fees to see the APR — the rate that includes them.
The fees do not lower the payment — you still repay the full loan — so the same payments cost more per dollar actually borrowed. That gap is what the APR adds to the nominal rate.
Formula and calculation
Worked example
A $100,000 loan at 6% over 30 years costs $599.55 a month whatever the fees. Add $3,000 of points and closing fees and the APR becomes 6.29% against a nominal rate of 6% — a 0.29% gap, because $3,000.00 of the money you borrowed never reached you.
What the results mean
- APR
- The annual percentage rate: the yearly cost of the loan once the upfront fees are counted, expressed as a rate. Two loans are only comparable on APR — the nominal rate hides the fees.
- Monthly payment
- Your monthly principal-and-interest payment. Fees do not change it; the loan itself still has to be repaid in full, which is why the APR rises instead.
- Upfront fees
- Points plus the other upfront fees, in dollars — money paid at closing rather than monthly.
- APR minus the rate
- APR minus the nominal rate, in percentage points: the price of the fees. A small spread is normal on a mortgage; a large one is worth negotiating.
Frequently asked questions
What is the difference between the interest rate and the APR?
The interest rate prices the loan itself; the APR prices the loan plus its upfront fees, spread over the term. A 6% loan with $3,000 of fees has an APR of about 6.29% — same monthly payment, higher true cost. Comparing offers on APR keeps the fees from hiding.
How is the APR calculated?
The monthly payment is computed on the full loan at the nominal rate, then a new monthly rate is found that makes the present value of those payments equal the amount financed (loan minus prepaid fees). Multiply that monthly rate by 12 and you have the APR. This calculator solves it by bisection on that equation.
Why does the APR rise when fees rise?
Because the money you actually got to use gets smaller while the payments stay the same. You pay $3,000 of fees but still repay the whole $100,000, so every dollar you borrowed does more work against you. The effect is stronger on short loans — the same fee is spread over fewer years.
Which fees count toward the APR?
Prepaid finance charges: points, origination and application fees, and similar costs the lender charges to make the loan. Third-party costs such as appraisal, title insurance and recording fees are excluded under the Truth in Lending rules, and taxes and insurance are never part of it.
Is the APR the rate I pay monthly?
No — nothing is charged at the APR. Your monthly payment still uses the nominal rate; the APR is a comparable-cost measure, like the price per pound on a shelf label. Use it to compare offers, not to compute a payment.