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WHAT IS THE DIFFERENCE BETWEEN AN INTEREST RATE AND ANNUAL PERCENTAGE RATE (APR) REAL ESTATE When it comes to refinancing or taking out a mortgage, understanding the financial terms involved is crucial to making an informed decision. One common point of confusion is the difference between the advertised interest rate and the loan's annual percentage rate (APR). While both are expressed as percentages, they represent distinct aspects of the loan's cost to borrowers. In this blog post, we will delve into the disparity between the interest rate and APR, why it exists, and how borrowers can use this information to compare loan options effectively. Interest Rate: The interest rate signifies the annual cost of a loan to a borrower and is expressed as a percentage. It represents the cost of borrowing money from the lender, and it directly influences the monthly mortgage payment. When comparing interest rates, borrowers typically look for the lowest rate available to minimize their repayment obligations. Annual Percentage Rate (APR): On the other hand, the annual percentage rate (APR) is a broader measure that incorporates not only the interest rate but also other charges and fees associated with the loan. These fees may include mortgage insurance, closing costs, discount points, and loan origination fees. Unlike the interest rate, which solely represents the cost of borrowing, the APR provides a more comprehensive overview of the total cost of the loan.