Buying a home can seem mysterious. There’s a whole new lexicon of words that you need to learn in order to make sure you’re making the best decision. Here’s one that people often don’t understand clearly – the difference between APR and loan rate.

WHAT YOU NEED TO UNDERSTAND

There are four things that determine the cost of a mortgage: interest rate, points, fees and other charges.

WHAT’S AN INTEREST RATE?

The interest rate is the cost you will pay every year to borrow money from your lender. The rate is a percentage of your total loan amount. This percentage does not include fees or any other charges associated with borrowing from a specific mortgage company.

WHAT’S AN APR?

Annual Percentage Rate or APR is a more all-encompassing measure of cost associated with borrowing money from a lender. The APR includes the interest rate, points, mortgage broker fees and any other charges associated with your loan. Because of this, your APR is usually higher than your interest rate.

When you’re looking at Adjustable-rate loans, understand that the APR isn’t the maximum interest rate of the loan. Be sure to talk to a SIRVA Mortgage associate to make sure you understand the total cost associated with your loan and how the interest rate and APR could fluctuate and how that will affect you in the long run.