What is not included in the APR for a loan?

The annual percentage rate (APR) is designed to provide borrowers with a comprehensive view of the total cost of borrowing by including various costs associated with obtaining a loan. However, not all expenses related to a loan are accounted for in the APR calculation.

Title insurance, which protects the lender and/or borrower against any losses from defects in the title to a property, is not typically included in the APR. This is because title insurance is considered an optional expense and is not directly tied to the cost of borrowing the principal amount. Instead, items like daily interest charges, mortgage insurance premiums (MIP or PMI), and origination fees are included in the APR since they reflect the costs associated with securing and maintaining the loan throughout its term.

In contrast, daily interest charges are a straightforward cost of borrowing and relate directly to how interest is calculated on the loan amount. Similarly, MIP or PMI is an ongoing cost of securing a mortgage, particularly for loans that have lower down payments. The origination fee, which is a charge for processing the loan, also directly affects the overall cost of obtaining the loan and is included in the APR calculation.

Thus, title insurance is excluded from the APR because it is not a mandatory cost associated with obtaining the loan, making it