Real Estate

What is Annual Percentage Rate vs Annual Interest Rate?

  • Last Updated:
  • May 22nd, 2019 12:10 pm
[OP]
Sr. Member
Nov 9, 2017
657 posts
67 upvotes

What is Annual Percentage Rate vs Annual Interest Rate?

What is Annual Percentage Rate and why is it higher? In getting a mortgage switched to Meridian I see that on their agreement document they show Annual Interest Rate as 1.98% and Annual Percentage Rate as 2.0%. What is this rate and how does it effect my payment?
4 replies
Member
Feb 15, 2018
329 posts
398 upvotes
The annual interest rate is just the interest on the loan amount itself e.g. mortgage of $100k
The APR on the other hand is the interest on the mortgage plus interest on other monies besides what is borrowed for the actual house e.g. CMHC fees. It all ends up being rolled into one payment.
Sr. Member
May 3, 2013
643 posts
199 upvotes
Toronto
Simple example using one year. If I borrow $100 and the bank is charging me 3% plus a $20 admin fee. The Annual Interest Rate is 3%. The APR is 23%.
Deal Fanatic
Jul 3, 2011
5776 posts
2939 upvotes
Thornhill
Do you mean what is the difference between the annual (actual) versus effective interest rate?
snowhite445 wrote: What is Annual Percentage Rate and why is it higher? In getting a mortgage switched to Meridian I see that on their agreement document they show Annual Interest Rate as 1.98% and Annual Percentage Rate as 2.0%. What is this rate and how does it effect my payment?
[OP]
Sr. Member
Nov 9, 2017
657 posts
67 upvotes
licenced wrote: Do you mean what is the difference between the annual (actual) versus effective interest rate?
On mortgage agreement I have two rates: Annual Interest Rate: 1.98% AND Annual Percentage Rate: 2.0%

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