Annual Percentage Yield
Defined by Onias Derilus, Mortgage Capital · NMLS# 1859012 · Florida licensed mortgage broker
Annual percentage yield, or APY, is the real rate of return on a deposit or investment over a year, accounting for compound interest.
What Annual Percentage Yield means
While APR measures borrowing cost, APY measures earnings on savings and reflects how often interest compounds. Buyers track APY on the savings holding their down payment, since compounding can modestly speed up how fast a fund grows.
Florida example
A buyer saving for a down payment kept funds in an account paying 4.5% APY, earning slightly more than the stated 4.4% rate because interest compounded monthly.
What it is
Annual percentage yield, or APY, shows the real yearly return on savings, including compound interest. It differs from a simple rate.
It matters most for deposit accounts, not loans.
Why to know it
Understanding APY helps you grow the savings you will use for a down payment. Every bit of interest helps.
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