What does APR stand for in mortgage lending?

The term APR in mortgage lending stands for Annual Percentage Rate. It is a critical metric used that represents the total cost of borrowing on a mortgage loan, expressed as a percentage. APR includes not just the interest rate charged on the loan but also takes into account various fees and costs associated with obtaining the loan over its term. This allows borrowers to better understand the true cost of borrowing and make more informed comparisons between different loan offers.

For instance, if a borrower is considering multiple loan options, the APR provides a way to accurately assess which loan may end up costing more in the long run when all associated fees are considered, rather than just focusing solely on the nominal interest rate.

This comprehensive measurement helps ensure transparency in lending practices, allowing potential borrowers to evaluate rates in a standard manner. By using the APR, consumers can gain insight into the total financial burden of a loan, factoring in both the interest payments and any additional costs, which supports better financial decision-making.