What does APR stand for in mortgage lending?

In mortgage lending, APR stands for Annual Percentage Rate. This term is crucial because it represents the total cost of borrowing on a loan, expressed as a yearly interest rate. APR includes not only the interest rate on the loan but also any additional fees or costs that may be incurred throughout the life of the loan, such as origination fees or certain closing costs. This comprehensive measure enables borrowers to understand the true cost of their mortgage over the course of a year, allowing for better comparisons between different loan options.

Understanding APR is fundamental for consumers, as it affects their total repayments over time. By focusing on the APR rather than just the nominal interest rate, borrowers can make more informed decisions regarding which loan terms are more favorable for their financial situation. This concept is especially significant in regulated markets where transparency in lending is emphasized to protect consumers from predatory lending practices.