Don’t Let APR Be the Only Thing You Compare!
Alok and I are heading to Banff, Canada this Friday for a week—one of those stunning bucket list destinations we’ve been talking about for years. As we get a little older (and hopefully wiser!), we’re trying to check off these experiences while we can still hike, explore, and eat all the desserts guilt-free. I will share pictures next week.
Do you have a destination or experience on your bucket list that you’re hoping to check off soon? I’d love to hear what’s on it—maybe we’ll inspire each other!
Now onto this week’s topic…
A client recently asked me, “What’s the APR on this loan?” Another wanted to know, “How much interest will I pay over 30 years?” Both great questions—but let’s zoom out for a moment.
Here’s the real kicker: most people don’t stay in their mortgage for 30 years. The average homeowner moves or refinances within 5 to 7 years.
That’s why APR (Annual Percentage Rate) and total interest can be misleading. They’re helpful—but only if you’re actually planning to stay in the loan long-term (and let’s be honest—most of us aren’t).
APR vs. Interest Rate: What’s the Difference?
APR = Interest rate plus certain lender fees (like discount points, origination charges, etc.). Because it includes fees, APR is always higher than the interest rate.
APR Can Be Misleading for Short-Term Plans: The loan with the lowest APR might not be the best deal if you’re not staying long. Why? Because you may never hit the break-even point where the lower rate saves you money.
A Real-Life Example:
- Loan A: Higher interest rate, higher APR, lower upfront costs
- Loan B: Lower interest rate, lower APR, but you pay points and higher fees
Loan B only saves you money if you keep it longer than the breakeven point. If you sell or refinance earlier? Loan A may actually cost you less overall.
What Should You Really Compare?
- Total cost in the first 5 years
- Monthly payment + PMI (if applicable)
- Upfront fees
- Flexibility to refinance or recast
Think beyond the APR—think about your life timeline. Are you staying 3 years? 7? Maybe forever? That matters more than one line on a Loan Estimate.
Pro Tip: APR can be especially distorted on FHA or PMI loans due to how fees are bundled.
So What’s the Best Move?
Before choosing a loan, ask yourself:
- What’s the 5-year cost?
- What’s my break-even point?
- Am I likely to move, refinance, or recast?
- Am I comparing the whole picture—or just the APR?
I’m happy to walk you through the details and help you find the option that actually fits your short- and long-term goals. Let’s look at the big picture together!
The BankSouth Mortgage Advantage:
Experience the speed of ReadyApprove from BankSouth Mortgage, where you can secure conditional approval for conforming loan limits within hours.
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Have peace of mind with our FREE one-time rate float-down* and no lender fee refinance options!
When you purchase your home with me at BankSouth Mortgage, you may be able to refinance later with no lender fees.** This program offers flexibility as life changes, with the potential for savings when it matters most.
* One-time float down available on 45-120 day rate locks. Float down must be executed at least 15 days prior to closing and must be at least .125 improvement. ** This offer may change or end at any time without notice. “No Lender Fees” refers to waived origination charges. Eligibility conditions apply. Subject to credit and property approval.
Blog post date: Thursday, July 10, 2025
