Understanding Mortgage Rates, Points, and APR

Posted by Jessica Akright on Aug 25, 2016 05:00:00 AM

Topic: ALL

Woman looking on laptop at mortgage rates

Navigating through mortgage terminology can be intimidating. It’s a lot to understand, keep track of, and consider. We’ve highlighted a few key terms that may affect your mortgage loan. If you still are unsure what program is right for you, our Loan Officers are always available to help you determine what is best for your individual situation.

Interest rates

These fluctuate based on a variety of factors, including inflation, the pace of economic growth, and Federal Reserve policy. Over time, inflation has the largest influence on interest rates. A modest rate of inflation will almost always lead to lower interest rates, while rising inflation normally causes interest rates to increase. Our nation’s central bank, the Federal Reserve, sets policies designed to keep both inflation and interest rates relatively in check.

At Bank Mutual, we also make every effort provide the lowest possible rates by embracing technology that streamlines our processes and creates operating efficiencies not often found with other lenders. And, we constantly monitor the lending marketplace to ensure our rates are competitive.


Charged by lenders, points are considered a form of interest. Each point is equal to one percent of the loan amount. They’re paid at your loan closing, usually in exchange for a lower interest rate over the life of the loan. This means you’ll need more money at closing, but you’ll have lower monthly payments over the life of your loan.

To determine whether it makes sense to pay points, compare the cost of the points to the monthly savings you’d realize with a lower interest rate. To do this, divide the total cost of the points by the savings in each monthly payment. This result is the number of payments you’ll make before you actually begin to save money by paying points. If the number of months it takes to recoup the points is longer than you plan on having this mortgage, consider a loan option that doesn’t require you to pay points.

To help you decide if a loan with points and a lower interest rate or a rate not impacted by the payment of points is right for you, you can use our simple calculator.


The Federal Truth in Lending law requires that all financial institutions disclose an APR (Annual Percentage Rate) when they advertise an interest rate. The APR is designed to present the actual cost of obtaining financing. However it is important to note not all closing costs, such as appraisal, title and document preparation fees, are included in the APR calculation.

The APR should only be a guideline when shopping for a mortgage. When deciding on the loan program that’s best for you, it’s important to look at the total fees, not just those included in the APR. It is also important to consider the “Note Rate” and to factor in potential rate adjustments if you go with an adjustable rate mortgage.

To learn more, consult with a Loan Officer near you