What the interest rate tells you
Your interest rate is what the lender charges to borrow the money. It decides your monthly principal and interest payment. Taxes, insurance and any mortgage insurance are added on top.
On its own, though, the rate doesn't show what you pay upfront to get it. Two lenders can offer the same rate with very different fees.
What APR adds
The annual percentage rate, or APR, spreads certain loan costs over the life of the loan and shows them as a yearly rate. Lenders calculate it under federal rules, so it gives you a common yardstick.
Escrow deposits for taxes and insurance aren't part of the APR, because they aren't costs of borrowing.
- Usually included: origination fees, discount points and some prepaid interest.
- Can be included: mortgage insurance and certain other lender charges.
- Usually not included: escrow deposits, and some third-party fees like the appraisal and title charges.
Two offers compared
Hypothetical example on a $175,000, 30-year fixed refinance. Offer A has a lower rate but $5,000 in fees. Offer B has a slightly higher rate and no lender fees.
Offer A saves about $14 a month on principal and interest. At that pace, it would take more than 28 years to earn back the $5,000. For most people, Offer B costs less. APR may differ; example only. Rates change daily.
- Offer A: 6.50% rate, about 6.81% APR with $5,000 in fees. About $1,106 a month.
- Offer B: 6.625% rate, about 6.65% APR with ZERO lender fees. About $1,121 a month.
Example details: $175,000 30-year fixed at 6.500% (6.808% APR): 360 monthly payments of $1,106.12 (APR includes $5,000 of finance charges); $175,000 30-year fixed at 6.625% (6.652% APR): 360 monthly payments of $1,120.54. Principal and interest only; taxes and insurance not included, so the actual payment will be higher. Unless noted, APR assumes ZERO Closing Costs, no discount points and 15 days of prepaid interest. Hypothetical example prepared November 4, 2026, not a current CapCenter rate offer; subject to credit approval.
How ZERO Closing Costs affects APR
When lender fees are waived or paid, there's little to add to the rate, so your APR sits close to it. With CapCenter's ZERO Closing Costs, CapCenter pays for or waives closing costs typically required to process the loan (restrictions apply). Prepaid interest still applies, which is why the APR can sit a little above the rate.
When APR can mislead
APR assumes you keep the loan for its full term. Most people sell or refinance well before then. If you expect to move or refinance in a few years, upfront fees matter more than the APR suggests.
In that case, compare the cash you pay at closing and your monthly payment, then work out how long it takes for a lower payment to cover higher fees.
Where to find these numbers
Your Loan Estimate shows both. The rate and monthly payment are on page 1. The APR is in the Comparisons section on page 3, along with the total interest percentage. Ask each lender for a Loan Estimate on the same loan type, term and amount so you can line them up.
