APR and the Note Rate

The note rate is the interest rate on your loan. It sets how much interest you pay and your principal and interest payment. The APR is a federally defined disclosure that combines the note rate with certain upfront costs, such as points and some lender fees, and expresses the total as a yearly rate over the full term. Because it adds costs, the APR is usually higher than the note rate (CFPB). The APR is a comparison tool. Your payment is built from the note rate.

Where each number appears

• The note rate is on page 1 of the Loan Estimate, in Loan Terms, and in your promissory note.
• The APR is on page 3, in the Comparisons section, next to the Total Interest Percentage (12 CFR 1026.37(l)).

What the APR includes

The APR is built from the finance charge, as Regulation Z defines it, and the amount financed (12 CFR 1026.18; 12 CFR 1026.22). In general:

• Usually included: interest, discount points, origination and many lender fees, and mortgage insurance premiums.
• Usually not included: title insurance and title examination fees, appraisal and credit report fees in many cases, and amounts for taxes and insurance in escrow.

That is why a change in a title fee can move your cash to close without moving the APR much.

When comparing APRs helps

• Two offers for the same loan type, term and amount, where one has more points or fees.
• Checking whether a low advertised rate comes with heavy upfront costs.

When comparing APRs misleads

• Different loan types. FHA mortgage insurance is treated differently from conventional mortgage insurance, so APRs across loan types are not apples to apples.
• Short holding periods. The APR spreads upfront costs over the full term. If you will sell or refinance in a few years, a lower APR with high points may cost you more.
• Adjustable-rate loans. The APR on an ARM assumes a path for future rates that may not happen. See adjustable-rate mortgages.

APR and the Closing Disclosure timing

If the APR on your Closing Disclosure becomes inaccurate beyond the regulatory tolerance after you receive it, the lender must give you a corrected disclosure and a new three business day waiting period before closing (12 CFR 1026.19(f)(2)(ii)). A changed APR does not always mean someone padded a fee. A different loan amount, a rate change at lock, or a corrected prepaid can move it. See the Closing Disclosure.

Fictional example

Fictional example: two Loan Estimates show the same note rate for the same 30-year fixed loan. One has discount points and the other has a lender credit. The APRs differ because the finance charges differ. A buyer who looks only at the APR misses the difference in cash to close. A buyer who looks only at the note rate misses the cost of the points. Both numbers are on the form for that reason.

Common mistakes

• Shopping the APR as if it were the rate charged each month.
• Comparing one lender's note rate to another lender's APR.
• Comparing APRs across FHA and conventional loans.

For the full comparison method, see comparing mortgage quotes and discount points.

Next step

If you have two offers and are not sure which is actually less costly for how long you plan to keep the loan, I can run the comparison with you. Book a call, or start an application.

Related questions

• How do I read a Loan Estimate?
• Should I pay discount points?
• Comparing mortgage quotes

Sources

Links checked Oct 21, 2026.

• CFPB Ask CFPB, What is the difference between a mortgage interest rate and an APR? (retrieved Oct 21, 2026): https://www.consumerfinance.gov/ask-cfpb/what-is-the-difference-between-a-mortgage-interest-rate-and-an-apr-en-135/
• CFPB Regulation Z, 12 CFR 1026.18 Content of disclosures (current text): https://www.consumerfinance.gov/rules-policy/regulations/1026/18/
• CFPB Regulation Z, 12 CFR 1026.22 APR determination (current text): https://www.consumerfinance.gov/rules-policy/regulations/1026/22/
• CFPB Regulation Z, 12 CFR 1026.37 Content of the Loan Estimate (current text): https://www.consumerfinance.gov/rules-policy/regulations/1026/37/
• CFPB Regulation Z, 12 CFR 1026.19(e) and (f) Loan Estimate, Closing Disclosure, tolerances and changed circumstances (current text): https://www.consumerfinance.gov/rules-policy/regulations/1026/19/

About the author: McKade Lively, NMLS 2704474, American Pacific Mortgage Corporation dba True North Home Loans, NMLS 1850.

Equal Housing Opportunity.

Last reviewed: Oct 2026

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