Annual Percentage Rate (APR) - Pylon Developer Platform (PDP)

Annual Percentage Rate (APR) represents the total cost of borrowing expressed as an annual percentage, incorporating not just the interest rate but also certain upfront fees and costs that are financed or paid at closing. APR provides a standardized way to compare the true cost of different loan options, accounting for variations in fee structures that can make loans with identical interest rates have significantly different total costs. APR is calculated by amortizing upfront costs over the loan term and combining them with the interest rate to produce a single percentage that reflects the total borrowing cost. This allows borrowers to make apples-to-apples comparisons between loans that might have different combinations of interest rates and fees. However, APR assumes the loan will be held for its full term, so it may not accurately reflect costs for borrowers who plan to refinance or sell before the loan matures.

What APR includes and excludes

APR includes the interest rate plus finance charges that are considered part of the loan cost. The specific fees included in APR are determined by federal regulations (Regulation Z) and must be fees that are:

Paid to secure the loan
Required to obtain the loan
Not paid to third parties for services that could be obtained independently

Fees typically included in APR

Fee Type	Description	Notes
Loan origination fees	Fees charged by the lender for processing the loan	Required lender fee
Underwriting fees	Fees for evaluating the loan application	Required lender fee
Processing fees	Fees for processing loan documentation	Required lender fee
Discount points	Upfront fees paid to reduce the interest rate	Optional but included if paid
Document preparation fees	Fees for preparing loan documents	Required lender fee
Mortgage insurance premiums	PMI, MIP, or other mortgage insurance	Only if financed into loan amount
Prepaid interest	Interest paid at closing for period until first payment	Interest for partial month
Application fees	Fees for loan application	Only if required to obtain loan
Credit report fees	Fees for pulling credit reports	Required for loan approval
Flood certification fees	Required flood zone determination	Required by lenders

Fees typically excluded from APR

Fee Type	Description	Why Excluded
Title insurance	Owner’s and lender’s title insurance policies	Third-party service, can be obtained independently
Appraisal fees	Property valuation services	Third-party service, can be obtained independently
Home inspection fees	Property inspection services	Third-party service, optional
Survey fees	Property boundary surveys	Third-party service, can be obtained independently
Recording fees	Government fees for recording documents	Government fee, not lender fee
Transfer taxes	State and local transfer taxes	Government fee, not lender fee
Property taxes	Prepaid property tax escrow	Prepaid item, not loan cost
Homeowners insurance	Prepaid insurance premiums	Prepaid item, not loan cost
HOA fees	Prepaid homeowners association dues	Prepaid item, not loan cost
Home warranty fees	Optional warranty coverage	Optional service
Environmental inspection fees	Optional inspections	Optional service
Pest inspection fees	Optional pest inspections	Optional service

Querying APR fees in GraphQL

To see which fees are included in APR for a specific loan, query the loan’s fees and check the paymentIncludedInAprIndicator field:

query GetLoanAprFees($loanId: ID!) {
  loan(id: $loanId) {
    id
    fees {
      id
      feeType
      feeDescription
      feeActualTotalAmount
      feePayments {
        feeActualTotalAmount
        paymentIncludedInAprIndicator
        feePaymentPaidByType
      }
    }
    productPricingRate {
      apr
      rate
      closingCosts
    }
  }
}

The paymentIncludedInAprIndicator field on each FeePayment indicates whether that specific fee payment is included in the APR calculation. Only fees where this field is true are included in APR. Example response:

{
  "data": {
    "loan": {
      "id": "loan_123",
      "fees": [
        {
          "id": "fee_1",
          "feeType": "LOAN_ORIGINATION_FEE",
          "feeDescription": "Origination fee",
          "feeActualTotalAmount": 4000,
          "feePayments": [
            {
              "feeActualTotalAmount": 4000,
              "paymentIncludedInAprIndicator": true,
              "feePaymentPaidByType": "BORROWER"
            }
          ]
        },
        {
          "id": "fee_2",
          "feeType": "APPRAISAL_FEE",
          "feeDescription": "Appraisal",
          "feeActualTotalAmount": 500,
          "feePayments": [
            {
              "feeActualTotalAmount": 500,
              "paymentIncludedInAprIndicator": false,
              "feePaymentPaidByType": "BORROWER"
            }
          ]
        }
      ],
      "productPricingRate": {
        "apr": 7.25,
        "rate": 7.0,
        "closingCosts": 12000
      }
    }
  }
}

In this example, the LOAN_ORIGINATION_FEE has paymentIncludedInAprIndicator: true, so it’s included in APR. The APPRAISAL_FEE has paymentIncludedInAprIndicator: false, so it’s excluded from APR.

APR vs. interest rate

The interest rate represents the cost of borrowing the principal amount, expressed as an annual percentage. It directly determines the monthly principal and interest payment and is the most visible cost component for borrowers. The APR provides a more comprehensive view by incorporating upfront fees and costs, giving borrowers a better sense of the total cost of the loan. APR is typically higher than the interest rate because it includes additional costs beyond just the interest. The difference between APR and interest rate can vary significantly depending on the loan’s fee structure. Loans with high origination fees or multiple discount points will have a larger gap between the interest rate and APR, while loans with minimal fees will have rates and APRs that are very close together. APR is particularly useful for comparing loans with different fee structures, as it normalizes the comparison by accounting for both ongoing and upfront costs. However, borrowers should also consider their specific situation, including how long they plan to keep the loan, when evaluating APR versus interest rate.

Points vs. rate - How points affect APR
Loan - How APR is calculated for loans

​What APR includes and excludes

​Fees typically included in APR

​Fees typically excluded from APR

​Querying APR fees in GraphQL

​APR vs. interest rate

​Related concepts

What APR includes and excludes

Fees typically included in APR

Fees typically excluded from APR

Querying APR fees in GraphQL

APR vs. interest rate

Related concepts