Mortgage Interest Rate vs APR

By Buying September 18, 2025
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Interest Rate vs APR for NYC Buyers

Light humor, heavy clarity—because numbers are sexier when they make sense.

Interest Rate vs. APR (NYC Buyers)

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TL;DR: Interest rate drives your monthly payment. APR = rate + certain lender finance charges, revealing your true borrowing cost for comparison.

Why NYC Buyers Should Care

In New York City, closing costs are substantial. While not all costs appear in APR, lender finance charges (like points and some origination costs) do. APR helps you compare apples-to-apples beyond the headline rate.

Quick Definitions

  • Interest Rate: The note rate used to calculate your monthly principal & interest.
  • Points: Upfront fees (1 point = 1% of loan) paid to reduce the rate.
  • APR: The note rate plus certain prepaid finance charges expressed annually.

Example: $2,000,000 Condo (Resale), 20% Down

Loan amount: $1,600,000

ScenarioNote RateUpfront Charges Counted in APREst. P&I / moIllustrative APR
A — No Points6.00%~$10,000≈ $9,592.81≈ 6.06%
B — Buy 1 Point5.75%~$26,000 (incl. ~$16k point)≈ $9,337.17≈ 5.90%
Break-even gut check: ~$16,000 / ~$255 ≈ 63 months (~5.25 years). Keep the loan longer? Buying down may pencil. Shorter horizon? Consider keeping the cash.

Illustrative only; APR rules vary by item and lender. Many NYC costs (title, mortgage recording tax, mansion tax, transfer taxes) typically do not appear in APR.

How to Use APR Smartly

  1. Compare identical structures (term, down payment, lock period).
  2. Check points and finance charges, not just the rate.
  3. Run a break-even: upfront points / monthly savings ≈ months to recoup.
  4. Model your monthly comfort zone.
  5. Add NYC costs back in for true cash-to-close planning.

Want a personal APR/points model? Book a quick consult and I’ll run scenarios for your price range, building, and timeline.

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Buyer FAQs

Is a lower APR always better? ▾
Usually—but not if you’ll move or refinance before you recoup any upfront points/fees that made the APR lower.
Why is APR higher than my interest rate? ▾
APR includes certain lender finance charges (like points and parts of origination), so it often sits slightly above the note rate.
Do taxes and title go into APR? ▾
Generally no. Big NYC items (title policies, mortgage recording tax, mansion tax, transfer taxes) typically are excluded from APR—but they still impact your cash to close.
Should I pay points? ▾
It can make sense if you’ll hold the loan long enough to pass the break-even point and you value lower monthly payments.
Can APR help me choose between lenders? ▾
Yes—APR is standardized to help you compare loan options fairly when structures or fee bundles differ.

This content is educational, not tax or lending advice. Always confirm specifics with your lender and CPA.

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