What does APR stand for?

• A. Average Percentage Rate
• B. Annual Percentage Rate
• C. Annual Percentage Point
• D. Applied Principal Rate

Answer: (B)

APR stands for Annual Percentage Rate. In mortgage lending, this is the annual cost of borrowing represented as a single percentage by combining the interest rate with most of the fees and points charged to obtain the loan, then annualized to allow apples-to-apples comparison of different offers. The reason this is the best answer is that it captures not just the interest cost but also the additional financing costs that affect what you pay over a year, giving you a true picture of cost. The other terms aren’t used in standard mortgage practice: Average Percentage Rate isn’t a recognized term; Annual Percentage Point would refer to a different concept related to rate changes; Applied Principal Rate isn’t a recognized lending term.