> ## Documentation Index > Fetch the complete documentation index at: https://docs.pylon.mortgage/llms.txt > Use this file to discover all available pages before exploring further. # Annual Percentage Rate (APR) > Understanding APR - the total cost of borrowing including fees **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: 1. Paid to secure the loan 2. Required to obtain the loan 3. 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: ```graphql theme={null} 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:** ```json theme={null} { "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](/entity-models/key-concepts/points-vs-rate) 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. ## Related concepts * [Points vs. rate](/entity-models/key-concepts/points-vs-rate) - How points affect APR * [Loan](/entity-models/loan) - How APR is calculated for loans