What does the overall cost for comparison mean?

skaps

Have been wondering about this for a while now, could you explain this to me in laymans terms please?
Thanks in advance

yelf

it allows you to do a like for like with another product, taking into account all fees etc over the term of the mortgage.

VIGILANT22

It is referring to the APR.

APR stands for the Annual Percentage Rate of charge. You can use it to compare offers.


The APR includes important factors such as:

• the interest rate you must pay;
• how you repay the loan; the length of the loan agreement (or term); frequency and timing of instalment payments; and amount of each payment; and
• certain fees associated with the loan.

All lenders have to tell you what their APR is before you sign an agreement. The APR will vary from lender to lender. Generally, the lower the APR the better the deal for you but don’t just look at the APR. It doesn’t include all the costs associated with a credit agreement – such as charges for late or missed payments, or balance transfer fees on a credit card. And the APR works best if you are comparing similar types of credit, over similar periods. Also look at the total amount payable.

skaps

Thanks for that. I never looked at that when i was looking at mortgages, I only looking at the interest rates for the fixed term.

VIGILANT22

Don't take the APR too seriously as you may not stay with that same mortgage for the rest of yr life (total amount payable)...however it is an important factor with loans, cc's etc

Thrugelmir

skaps wrote: »

Thanks for that. I never looked at that when i was looking at mortgages, I only looking at the interest rates for the fixed term.

It makes a difference as interest charged say monthly, compounds over the whole year. Whereas interest charged annually is just that, a one off charge. So although the interest rate quoted may be the same, the real cost of borrowing , the APR, is higher for the monthly option.

MBM

As Vigilant says, the APR doesn't really count for much when it comes to mortgages unless you stay on the same product for the full term.

getmore4less

When doing like for like with mortgages the easiest way is to compare the start and end points with the same cash inputs

So amount borrowed including fees, same monthly payments, whats left at the target date.

dimbo61

"the overall cost for comparison" is for me a red herring !!!When you read the deals being offered is might say fixed for 3 years at 3.99% followed by our SVR at 4.99% for the next 22 years overall cost for comparison 4.24%.But in 3 years time who knows what the SVR will be 0.5% or 15.4%!!!Better to put the 3 year fix deal into "whatshecost" website and see how much you will have paid off the debt after 3 years.