How can mortgages with different "rates" all have the same APR?

I’m looking at the PenFed mortgage products. Here’s a screenshot.

Am I the only one who finds this confusing? How can different rates get the same APR?
Rate: 4.125 APR: 4.628
Rate 4.875 APR: 4.628


If that’s not confusing enough, the Jumbo loan below has the same rate of 4.125, but yet another APR value.

How is this possible? Different compounding schedule?

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My guess is fees, charges, etc. that cause the percentage of your payment to be higher during the first 5 years than the rate, and then even out in the last 25 years.


On a fixed loan, any positive closing costs (ones you have to pay) are included in the APR. If you exclude the closing costs or the closing costs are negative (you get a credit), the APR will equal the rate.

The APR is approximated over 30-years. Because the loan rate will reset, most likely upwards on an ARM (once on the 15/15, multiple times on the 5/5), the APR is higher than the rate. The jumbo most likely has higher closing costs than the non-jumbo (conforming).


Thank you, this was super helpful.

Rate is the interest rate of the loan. APR includes fees and costs the lender charges. Use APR when comparing the real rate including different lender’s fees (origination fees, points, etc).

This is the correct approach, however only after you verify that each quote includes the same considerations in the APR. Some lenders will only quote including their own origination fees. Others will include all fees/charges including third party fees like title and settlement (estimated).

If they don’t include the same things in the APR that’s presented, then it’s apples and oranges and the APR comparison is less meaningful.

An alternate method to compare is to look at the same rate at the different lenders. Then convert any points to $$$$ (1 point = 1% of the loan amount) and add that to any/all lender fees, including the same parts for each lender (either include third party or leave it out for all). Now, at any given interest rate you can directly compare the cost at each lender.

Rates usually change daily but can sometimes even change more than once a day, such as if there’s lots of market volatility. So, you need to obtain the quotes from each lender on the same day to do the comparison.

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