- APR
- The annual percentage rate: the yearly cost of the loan including certain lender fees, expressed as a single rate. It is the rate at which your payments repay the amount financed rather than the full loan amount. This calculator shows it next to the note rate so the effect of fees is visible.
- Note rate
- The interest rate written in the promissory note, used to calculate the monthly payment. It does not reflect fees. Two loans with the same note rate can have different APRs if one charges more in points or origination fees, which is the comparison this calculator is built for.
- Discount points
- Upfront fees paid to the lender to lower the interest rate. One point equals 1% of the loan amount, so one point on a $300,000 loan costs $3,000. Points lower the note rate but are counted as fees, so whether they reduce the APR depends on how much rate each point buys.
- Origination fee
- A charge by the lender for processing and underwriting the loan, often quoted as a percentage of the loan amount. It is a prepaid finance charge, so it is included in the APR. Enter it, along with points and similar lender charges, in this calculator’s Lender Fees & Points field.
- Amount financed
- The loan amount minus prepaid finance charges such as origination fees and points. You repay the full loan amount but effectively receive only this net figure. With a $300,000 loan and $6,000 in fees, the amount financed is $294,000, and the APR is figured on that smaller number.
- Principal and interest
- The part of the monthly payment that repays the loan and pays interest on it, calculated from the loan amount, note rate and term. Taxes, insurance and mortgage insurance are not included. Fees do not change this payment unless they are financed into the loan; they change the APR instead.
- Loan term
- The length of time scheduled to repay the loan in full. A longer term lowers each payment but keeps the balance outstanding longer, so total interest rises. It also affects APR: upfront fees spread over a longer term raise the APR less than the same fees on a shorter loan.
- Loan Estimate
- The standard disclosure form lenders must provide shortly after a mortgage application. It lists the rate, APR, monthly payment and closing costs in the same layout for every lender, which makes offers comparable. The fees on it are the numbers to enter here when checking a quote.
