Rate Words That Confuse People

Key takeaways

A yearly measure that includes the note rate plus certain fees, spread over the full term. Annual percentage rate
The rate available with neither discount points nor lender credits. Par pricing
Discount points are paid upfront to lower the rate; lender credits reduce closing costs in exchange for a higher rate. Points and credits

Note rate

The interest rate written into your promissory note, used to calculate monthly interest.

Annual percentage rate

A yearly measure that includes the note rate plus certain fees, spread over the full term. It is required on disclosures to help comparisons, but assumes you keep the loan for its entire term.

Par pricing

The rate available with neither discount points nor lender credits. Lenders may not use this term with you, but asking for a no-points, no-credit quote gets you close to it.

Points and credits

Discount points are paid upfront to lower the rate; lender credits reduce closing costs in exchange for a higher rate. Each point equals one percent of the loan amount.

Lock

An agreement to hold pricing for a set period while your loan closes.

Teaser rate

An informal term for an initial rate on an adjustable loan that is lower than the fully indexed rate. Ask what the rate would be today using the index plus the margin.

Bottom line

When a quote uses an unfamiliar term, ask the lender to explain it in writing and show where it appears on the Loan Estimate.

Escrow

An escrow or impound account is held by your servicer to pay property taxes and insurance. The monthly escrow amount is part of your payment but not part of your rate.

Sources

Sources reviewed October 23, 2026. General education only; confirm current rules with official sources and a licensed lender.