When you're researching mortgages you'll come across hundreds of advertisements for mortgages with incredibly low interest rates. These rates are used to entice new customers and it's unlikely that the rate you will pay on your own mortgage will be the advertised rate. The rates shown in advertisements are normally based on certain assumptions, such as loan amount and a down payment of at least 20%.

The 'headline rate' used for mortgages is the rate of interest payable per month or year. The APR or Annual Percentage Rate states the rate of interest payable over the entire length of the loan term. It takes into account all related fees and charges you may have to pay and as such it's a far more reliable measure of what it will cost you to borrow the money for your mortgage. It's the best way of comparing loan rates of any kind and lenders are required to quote this rate when you borrow from them.

Your monthly payment will be based on the stated rate, and the APR takes into account the payment of points, origination fees, prepaid interest and PMI (if required), among others.