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Question of the week: What’s the difference with mortgage APR rates?
Former_MSE_Wendy
Posts: 929 Forumite
Q. I’m looking for a new mortgage but wondered why they all have two different interest rates, APR and none APR. What’s the difference?
A. Mortgages are often advertised with two rates. The higher one's, that lenders are obliged to include, is usually the Annual Percentage Rate (APR) which describes the equivalent interest cost over the FULL TERM of the loan including all fees.
Sadly APRs can sometimes do more to confuse than educate when it comes to mortgages; as they're not that relevant as most people dont keep mortgages for the full 25 years. And even if you do the rate is variable anyway.
So when choosing a mortgage, focus on the short term rate and fees. Then just peek at the APR to see how competitive the deal would be if you were unable to shift to a mortgage deal when you fixed or discount rate ends.
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A. Mortgages are often advertised with two rates. The higher one's, that lenders are obliged to include, is usually the Annual Percentage Rate (APR) which describes the equivalent interest cost over the FULL TERM of the loan including all fees.
Sadly APRs can sometimes do more to confuse than educate when it comes to mortgages; as they're not that relevant as most people dont keep mortgages for the full 25 years. And even if you do the rate is variable anyway.
So when choosing a mortgage, focus on the short term rate and fees. Then just peek at the APR to see how competitive the deal would be if you were unable to shift to a mortgage deal when you fixed or discount rate ends.
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