If you are shopping for a mortgage in Florida, you’ve likely been told to "just compare the APR." It sounds like simple advice, but in today's mortgage market, the APR (Annual Percentage Rate) can be a deeply misleading metric. At Contemporary Mortgage Services, Inc., we see it every day: a borrower thinks they are getting a better deal elsewhere because of a lower APR, only to realize they are actually bringing thousands of dollars more to the closing table. Here is why the APR doesn't always tell the truth. 1. What exactly is APR? The APR was designed to show the "total cost of credit" over 30 years. It combines your Interest Rate with certain fees like origination, prepaid interest, title closing fee, and mortgage insurance. But it doesn't take in to consideration certain lender credits. The APR Formula: Interest Rate + Additional Fees (e.g. prepaid interest, lender fees, etc...) = APR 2. The "Borrower Paid" Structure vs. The APR As a mortgage broker, we often structure our loans as Borrower Paid. This is the most transparent way to handle a loan, but it "breaks" the APR math. Here’s why: Our Approach: We show an Origination Fee (which inflates the APR), but then we provide a large Lender Credit to offset it. The APR Problem: Federal math rules require the Origination Fee to be counted in the APR, but they don't always allow the Lender Credit to offset that number in the APR calculation. The result? Our APR looks higher, but your Actual Cash to Close is lower. You pay less, even though the APR says more. 3. The "Discount Point" Illusion Many lenders hide their costs in "Discount Points." Because of how these are disclosed, they can sometimes make an APR look artificially low while still charging you more out of pocket. If Lender A has a lower APR but is charging you $4,000 in points, and Contemporary Mortgage has a higher APR but is giving you a $2,000 credit—we are the cheaper option by $6,000! 4. Mortgage APR vs. Credit Card APR Most people are used to Credit Card APRs, where a lower number always means a cheaper card. Mortgages are different. A mortgage APR assumes you will keep your home for 30 years without ever selling or refinancing. Since most homeowners move or refinance every 7-10 years, the 30-year APR calculation becomes irrelevant almost immediately. 5. How to Truly Compare Quotes Stop looking at the APR and look at these three things on your Loan Estimate: What to Check Why it Matters The Interest Rate This determines your actual monthly payment. Lender Credits (Box J) This is "free money" the lender is giving you to cover costs. Estimated Cash to Close The actual check you have to write at the end of the day. Pro Tip: Always compare the "Cash to Close." If a lender has a lower APR but a higher "Cash to Close," they aren't saving you money—they are just hiding their fees better.