What is the difference between APR and the interest rate?

The interest rate is the cost of borrowing the principal, while APR adds in most mandatory fees to show the true annual cost of the loan.

Is a lower APR always better?

Usually, since a lower APR means lower overall cost. But always check which fees are included and whether the mortgage features, like prepayment terms, suit your needs.

Why is my APR higher than my mortgage rate?

Because APR includes fees on top of interest. The larger the upfront fees, the more the APR rises above the stated interest rate.

Mortgage Glossary

What is Annual Percentage Rate (APR)?

The Annual Percentage Rate (APR) is the yearly cost of a mortgage expressed as a percentage, combining the interest rate with most mandatory borrowing fees. In Canada, APR gives a fuller picture of the true cost of a loan than the interest rate alone. A higher APR relative to the rate signals significant fees built into the mortgage.

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Quick answer

Also known as: APR, annual percentage rate

Key points

APR expresses the yearly cost of borrowing including most mandatory fees.
It is usually equal to or higher than the stated interest rate.
Canadian lenders must disclose APR so borrowers can compare costs.
A large gap between rate and APR signals significant fees.
Some costs, like legal or appraisal fees, may be excluded from APR.

Annual Percentage Rate (APR) explained

APR rolls the interest rate together with required costs of borrowing, such as certain lender or broker fees, into a single annualized percentage. Because it captures more than just interest, APR is designed to let borrowers compare different mortgage offers on a more level footing, even when the fees differ.

In Canada, lenders are required to disclose the APR so consumers can see the effective cost of credit. The APR is usually close to the stated interest rate on a standard mortgage with few fees, but it can be noticeably higher on loans with large upfront charges. Note that some costs, like appraisal or legal fees, may be excluded from the calculation.

What a Annual Percentage Rate (APR) is for

APR exists to promote transparency and fair comparison. By folding fees into one number, it prevents lenders from advertising a low headline rate while hiding the real cost in charges, helping borrowers judge the genuine price of borrowing.

How it can help you

APR helps Canadian borrowers compare mortgages apples-to-apples instead of being misled by a tempting rate that hides fees. When you compare offers from 40+ lenders for free through Lenderoo, checking the APR alongside the rate ensures you understand the all-in cost before you commit.

When it comes up

APR becomes important when two lenders advertise nearly identical interest rates but one charges a hefty origination fee. The fee-heavy lender will show a higher APR, revealing that its loan actually costs more despite the similar headline rate.

Example: rate vs APR

Lender A offers a 5.00% interest rate with no fees, so its APR is also about 5.00%. Lender B advertises a 4.90% rate but charges $4,000 in fees on a $400,000 mortgage.

Once those fees are spread across the loan, Lender B's APR might rise to roughly 5.05%. The lower headline rate actually costs more, and the APR makes that clear at a glance.

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Questions & answers

Annual Percentage Rate (APR): frequently asked questions

Common questions Canadians ask about annual percentage rate (apr).

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Related mortgage terms

Interest Rate

The cost of borrowing money, expressed as a percentage of the loan amount.

Read definition

Fixed-Rate Mortgage

A mortgage with an interest rate that remains constant.

Read definition

Closing Costs

Fees and expenses paid when finalizing a real estate transaction

Read definition

Lender

A financial institution or company that provides the money for a mortgage.

Read definition

Mortgage Broker

A licensed professional who arranges mortgages between borrowers and multiple lenders.

Read definition

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Find my best mortgage Explore the glossary

Mortgage Glossary

What is Annual Percentage Rate (APR)?

Find my best mortgage Back to glossary

Quick answer

Also known as: APR, annual percentage rate

Key points

APR expresses the yearly cost of borrowing including most mandatory fees.
It is usually equal to or higher than the stated interest rate.
Canadian lenders must disclose APR so borrowers can compare costs.
A large gap between rate and APR signals significant fees.
Some costs, like legal or appraisal fees, may be excluded from APR.

Annual Percentage Rate (APR) explained

What a Annual Percentage Rate (APR) is for

How it can help you

When it comes up

Example: rate vs APR

Lender A offers a 5.00% interest rate with no fees, so its APR is also about 5.00%. Lender B advertises a 4.90% rate but charges $4,000 in fees on a $400,000 mortgage.

Once those fees are spread across the loan, Lender B's APR might rise to roughly 5.05%. The lower headline rate actually costs more, and the APR makes that clear at a glance.

Have a question about annual percentage rate (apr)?

Lenderoo shops 40+ lenders for free and matches you with a mortgage professional who explains every term — and finds your best rate.

Get pre-approved free Talk to an expert

Questions & answers

Annual Percentage Rate (APR): frequently asked questions

Common questions Canadians ask about annual percentage rate (apr).

Keep learning

Back to full glossary

Understand your mortgage with confidence

Lenderoo shops 40+ lenders for free and pairs you with a mortgage professional who keeps the jargon simple — and gets you a great rate.

Find my best mortgage Explore the glossary