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The Annual Percentage Rate (APR) is the mortgage’s interest rate plus most other mandatory costs of borrowing, expressed as a single annual percentage — giving borrowers a fuller, all-in cost of borrowing than the interest rate alone.
When a mortgage has no extra mandatory fees baked into the financing, the APR and the interest rate are the same number. They diverge when the lender rolls in required costs — for example, certain lender or administration fees, or the value of a cash-back incentive that has to be repaid or offset — which push the APR above the quoted interest rate.
Because APR standardizes for those extra costs, it’s the more reliable number for comparing two different lenders’ offers on the same file, rather than comparing interest rates alone. Canadian lenders are required to disclose the cost of borrowing, including the APR, before a mortgage is finalized.
Disclosure is mandatory: federally regulated lenders must disclose the cost of borrowing, including APR, in the mortgage documentation before the deal closes.
Cash-back mortgages: a cash-back mortgage often shows a wider gap between interest rate and APR, since the cash-back cost is factored into the APR calculation.
Not the posted rate: APR is a cost-of-borrowing disclosure figure, not the same concept as a lender’s posted rate.
Useful for comparison shopping: brokers and agents use APR to compare offers with different fee structures on a like-for-like basis rather than rate alone.
Definitions reflect Canadian federal and provincial rules as of the “Updated” date above. Not advice for any specific file.
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