The second step is to calculate what interest rate produces a monthly payment equal to the APR payment amount. In this case, we calculate the interest rate that would require a LOAN_APR_PAYMENT monthly payment on a loan of TERM years in the amount of LOAN_AMOUNT. The result is LOAN_APR which is the APR for your loan.

**Note:** It is important to point out that **the APR for a loan with no fees is always the same as the stated interest rate**. If you have a loan where the lender pays you for taking a higher interest rate, your APR for that loan may be **lower** than the stated interest rate.

Loan amount | LOAN_AMOUNT |

Term | TERM years |

Interest rate | INTEREST_RATE |

Monthly payment (PI) | MONTHLY_PI |

Total principal and interest payments | TOTAL_OF_PAYMENTS |

Total interest | INTEREST_PAID |

Origination fee | ORIGINATION_FEES_AMT |

Paid for points | DISCOUNT_POINTS_AMT |

Other fees | OTHER_FEES |

Total closing costs | TOTAL_CLOSING_COSTS |

- Mortgage amount
- Original or expected balance for your mortgage. Taxpayers can deduct the interest paid on first and second mortgages up to $1,000,000 in mortgage debt (the limit is $500,000 if married and filing separately). Any interest paid on first or second mortgages over this amount is not tax deductible. Home equity loans are limited to $100,000 or the amount of equity you have in your home. Our calculator limits your interest deduction to the interest payment that would be paid on a $1,000,000 mortgage.
- Interest rate
- Annual interest rate for this mortgage.
- Term in years
- The number of years over which you will repay this loan. The most common mortgage terms are 15 years and 30 years.
- Monthly payment
- Monthly principal and interest payment (PI).
- Loan origination percent
- The percent of your loan charged as a loan origination fee. For example, a 1% fee on a $120,000 loan would cost $1,200.
- Discount points
- Total number of "points" purchased to reduce your mortgage's interest rate. Each 'point' costs 1% of your loan amount. As long as the points paid are not a broker's commission, they are considered tax deductible in the year that they were paid.
- Other fees
- Any other fees that should be included in the APR calculation. These fees can vary by lender, but at a minimum usually includes prepaid interest.
- Annual Percentage Rate (APR)
- A standard calculation used by lenders. It is designed to help borrowers compare different loan options. For example, a loan with a lower stated interest rate may be a bad value if its fees are too high. Likewise, a loan with a higher stated rate with very low fees could be an exceptional value. APR calculations incorporate these fees into a single rate. You can then compare loans with different fees, rates or different terms.

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