What is the APR in mortgage terminology?

The Annual Percentage Rate (APR) in mortgage terminology is defined as the total cost of borrowing expressed as an annual rate. It encompasses not only the interest rate on the loan but also includes any additional fees and costs associated with obtaining the mortgage, such as lender fees, closing costs, and mortgage insurance. This comprehensive view allows borrowers to understand the overall cost of financing and makes it easier to compare different mortgage offers.

By incorporating all associated fees into the APR, borrowers gain insight into the true expense of their loan over the life of the mortgage, as opposed to just looking at the nominal interest rate, which can be misleading. Thus, choosing the option that states the APR includes interest and fees accurately represents its definition and purpose in mortgage lending. This clarity is essential for making informed financial decisions when selecting a mortgage.