APR vs Interest Rate: Phoenix 2026 Guide | Roadrunner
When you receive a mortgage quote, you'll see two prominent percentages: the interest rate and the Annual Percentage Rate (APR). While they may seem similar, they represent different things. Understanding the distinction is essential for making an apples-to-apples comparison between loan offers.
What is the Interest Rate?
The interest rate is simply the percentage of the loan amount that you're charged for borrowing the money. It is used to calculate your monthly principal and interest payment. It's the cost of the money itself, without any other fees included.
What is the APR?
The Annual Percentage Rate (APR) represents the broader cost of your mortgage. It includes your interest rate PLUS other costs associated with the loan, such as lender fees, discount points, and some closing costs. Because it includes these extra fees, the APR is almost always higher than the interest rate.
Why is the APR Important?
The APR is your best tool for comparing different loan offers. A loan with a very low advertised interest rate might have high fees, which would result in a higher APR. Conversely, a loan with a slightly higher interest rate but very low fees could have a lower APR. By comparing the APR from different lenders, you get a more accurate picture of which loan or refinance package is truly the most affordable over the long term.
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Jonathan Moses
Senior Loan Officer | NMLS #2064741
This guide was prepared by Jonathan Moses (NMLS #2064741), the senior loan officer and founder of Roadrunner AZ Lending. With years of experience in the Phoenix and Scottsdale markets, Jonathan is dedicated to providing expert, transparent advice. Learn more about Jonathan.