The quoted rate on a mortgage is the rate of annual interest, expressed as a percentage.

The annual percentage rate or APR includes not only the interest, but also certain fees paid to the broker or lender for processing the loan, such as points (one point equals 1 percent of the loan amount).

Federal law requires lenders to provide an APR to make it easier to compare loans with different rates and fees.

The New York Federal Reserve gives this example: A 30-year mortgage with an interest rate of 8 percent and four points would have an APR of 8.44 percent, while a mortgage with an interest rate of 8.25 percent and one point would have an APR of 8.36 percent.

The APR is not foolproof, because certain fees are not included such as appraisal, home inspection, credit report and title fees.