Which factor is NOT typically included in calculating APR?

The annual percentage rate (APR) is a calculation that includes the cost of borrowing expressed as a yearly interest rate. Its purpose is to provide borrowers with a clear understanding of the total cost of a loan, taking into consideration not just the nominal interest rate but also any additional costs associated with obtaining the loan.

In calculating APR, the following factors are typically included:

• The interest rate is the primary rate charged for borrowing the funds.

• Loan processing fees, which may include origination fees or other one-time charges related to processing the loan, are factored in to give a more complete picture of the cost of the loan over its term.

• The loan term length is also considered, as it affects how long the borrower is paying interest and fees.

However, homeowner's insurance costs do not factor into the APR calculation, because these costs are not directly related to the loan itself. They are a separate expense that a borrower incurs in order to protect the property. Since APR focuses on the cost associated with the loan, it excludes items like insurance, property taxes, or maintenance costs that fall outside the scope of borrowing. Thus, it is clear why homeowner's insurance costs are the correct answer for what is NOT typically included in the calculation of APR