When you obtain a mortgage you will hear the lender quote an interest rate and the APR. APR stands for the annual percentage rate, which is defined as an annualized cost of credit. This means that the APR is the rate that you will really be paying on your mortgage because this figure includes upfront costs such as points, closing costs, and prepaid interest. Mortgage lenders are required by law to disclose the APR to borrowers when quoting the interest rate. Because the APR includes other costs besides the actual amount of the mortgage, it is higher than the interest rate that is used to calculate the monthly mortgage payments. Hope this is helpful and is very important to understand, I am both a Realtor and lender for many years and would like to inform you on great things on the lending end like lender credit !