Compare loan pricing · Read standardized disclosures
Mortgage interest rate, APR, and TIP: what differs?
These percentages answer different questions. Reading them together helps separate the payment rate, certain borrowing charges, and scheduled lifetime interest.
The short answer
The interest rate prices borrowed principal. APR combines that rate with certain loan charges in an annualized measure. TIP shows scheduled interest over the full term as a percentage of the amount borrowed. No one percentage replaces the full Loan Estimate.
01 · Payment rate
The interest rate does not include loan fees
The mortgage interest rate is the annual cost charged for borrowing principal, expressed as a percentage. It is used to calculate the principal-and-interest portion of a scheduled payment. It does not include points, lender fees, mortgage insurance, property taxes, homeowners insurance, or other charges.
02 · Broader annualized cost
APR includes the rate and certain borrowing charges
Annual Percentage Rate combines the interest rate with certain points, broker fees, and other finance charges. Because it includes more than interest, a mortgage APR is usually higher than its note rate. APR is useful when similar offers have different combinations of rates and upfront charges.
Use the note rate and loan terms for principal-and-interest math. Use APR as one broader comparison measure, then inspect the actual charges and payment schedule.
03 · Scheduled lifetime interest
TIP assumes the loan is kept for its full term
Total Interest Percentage adds the scheduled interest payments over the full loan term and divides that total by the loan amount. It assumes every payment is made as scheduled and the loan remains in place for the entire term. TIP excludes most upfront fees, so a lower TIP does not necessarily mean lower total transaction costs.
04 · Standard locations
Find the rate on page 1 and APR and TIP on page 3
On a standard Loan Estimate, the interest rate appears under Loan Terms on page 1. APR and TIP appear in Comparisons on page 3. Loan costs and other costs appear on page 2. Keep those pages together so a percentage is never separated from the assumptions behind it.
05 · Comparison limits
APR and TIP cannot predict every adjustable-rate outcome
CFPB guidance warns that an ARM's APR does not reflect the maximum possible interest rate. ARM TIP uses current rates, so actual interest can be higher or lower as the index changes. APR treatment also differs between closed-end mortgages and HELOCs. Compare like with like and read the adjustable-rate tables, caps, index, and margin.
06 · Whole-offer review
Match the loan type, term, amount, and comparison date
Compare Loan Estimates for the same kind of loan and the same loan amount. Review the rate, APR, TIP, five-year cost, cash to close, monthly payment, points, credits, and prepayment terms. Rates can move, so estimates received on different days may not be directly comparable.
- Interest rate and whether it is fixed or adjustable
- APR and the charges included in its calculation
- Total Interest Percentage and the assumed full loan term
- Loan amount, term, points, lender credits, and closing costs
- Principal-and-interest payment and estimated total monthly payment
- Rate-lock status and every adjustable-rate limit
07 · Preserve the offer
Keep all pages and the assumptions that produced them
- Page 1 Loan Terms and Projected Payments
- Page 2 Loan Costs and Other Costs
- Page 3 Comparisons, including APR and TIP
- Rate-lock status and expiration
- Adjustable-rate tables when applicable
- Matching Loan Estimates received on the same day when possible
08 · Official guidance