Which term represents the true cost of financing a mortgage?

The Annual Percentage Rate (APR) is the term that best represents the true cost of financing a mortgage. It encompasses not only the interest rate on the loan but also incorporates various other costs that a borrower may encounter over the life of the loan. This includes fees for closing, loan origination, and any other costs that may be included in the mortgage terms.

The APR provides a more comprehensive picture of the overall expense involved in taking out a mortgage compared to just looking at the nominal interest rate. By expressing these costs as a percentage of the loan amount, the APR allows potential borrowers to effectively compare different mortgage offers in terms of their true overall cost.

In contrast, while the Effective Interest Rate also reflects the total cost of borrowing under certain circumstances, it doesn’t always account for additional fees in the way that APR does. The Loan-to-Value Ratio primarily assesses risk by comparing the loan amount to the property's value, and the Origination Fee is just a specific cost associated with processing the loan, which does not provide a broad view of financing costs.