Bridge Loan Glossary

Note Rate vs APR

The note rate is the stated interest rate on a loan, which determines the monthly interest payment. The APR (Annual Percentage Rate) is a broader measure that includes the note rate plus certain fees, expressed as an annualized percentage. APR represents the true annual cost of borrowing.

Note Rate: What Your Monthly Payment Is Based On

The note rate, also called the contract rate or stated rate, is the percentage used to calculate your monthly interest payment. On a $500,000 bridge loan at a 10.45% note rate, the monthly interest payment is $500,000 x (0.1045 / 12) = $4,354.

The note rate does not change over the loan term for fixed-rate bridge loans. It is the number quoted in your loan term sheet and referenced in the promissory note you sign at closing.

APR: The Full Picture of Borrowing Cost

APR adds certain lender fees, including origination fees and points, to the interest rate and spreads them across the loan term to produce a single annualized percentage. APR is always higher than the note rate because it includes these upfront costs.

Why APR Can Be Misleading on Short-Term Loans

APR is calculated assuming you hold the loan for its full term. On a bridge loan paid off in 90 days, the effective cost is very different from the APR shown on a 12-month term. Upfront costs like points have a larger impact on short payoff scenarios than the APR calculation reflects for a full term.

How to Evaluate Bridge Loan Cost Accurately

Rather than relying on APR alone, calculate your total cost based on your expected payoff timeline. Add the origination fee (points) to the total interest you expect to pay for the number of months you hold the loan. Because North Coast Financial bridge loans have no prepayment penalties, early payoff reduces your total interest cost with no additional charge.

For example: $600,000 loan at 10.45%, 1.5 points, paid off in 3 months. Origination fee: $9,000. Monthly interest: $5,225 x 3 months = $15,675. Total cost: $24,675. No further penalty on payoff.

Frequently Asked Questions

The note rate is the stated interest rate used to calculate monthly payments. APR includes the note rate plus certain fees expressed as an annualized percentage. APR is always higher than the note rate because it accounts for upfront costs like points.
For short-term loans like bridge loans, calculating total cost based on your expected payoff timeline is more useful than comparing APR. Add the origination fee to the total monthly interest you expect to pay for the number of months you hold the loan.
APR assumes you hold the loan for the full stated term and spreads upfront costs accordingly. Bridge loans are often paid off in 60 to 90 days, making the actual total cost very different from the APR annualized figure.