What is a Mortgage APR Calculator?
The annual percentage rate is the cost of your loan expressed as a yearly rate, and in the United States it is not a marketing figure — it is defined in law. Regulation Z, which implements the Truth in Lending Act, prescribes exactly how it must be computed. This calculator implements that method: the actuarial method of 12 CFR Part 1026, Appendix J.
Your interest rate prices the money you borrowed. Your APR prices the money you actually received. When you pay points or an origination fee, those are withheld from the proceeds — you pay interest on money that never reached you. That gap is what the APR captures, and it is why the APR on a real mortgage is always higher than the note rate.
When to Use It
- Comparing two loan offers where one has a lower rate but higher points.
- Checking a Loan Estimate: the APR box on page 3 is computed this way, and it is legally accurate only within ±0.125 percentage points.
- Understanding why a "no-fee" loan at a higher rate can be cheaper than a low-rate loan with two points.
Which fees count
This is where most calculators go wrong, and they go wrong in both directions. A charge counts only if it is both a finance charge and prepaid — paid before or at closing, or withheld from the proceeds (12 CFR 1026.2(a)(23)). Points, origination and underwriting fees, prepaid interest and the mortgage insurance premium count. Bona fide and reasonable title, appraisal, credit-report and escrow fees are specifically excluded (12 CFR 1026.4(c)(7)).
Entering every closing cost will overstate your APR just as surely as entering none will understate it.
Why "nominal" matters
Appendix J requires the APR to be the nominal annual rate: the monthly rate multiplied by twelve. It is not compounded. This is the opposite of the European APRC, which is an effective annual rate — the same three letters, two different numbers. A calculator that compounds is not slightly off; it is answering a different jurisdiction's question.
