Mortgage rate confusion? [Rate] VS[APR Rate?] VS [Overall comparison per cost rate ?]

Danny_G

What is the rate of a mortgage, compared to the APR Overall comparison per cost rate?

What does the fixed rate for 2 years mean ?
What does the the APR Overall comparison per cost rate mean?
and what does the Subsequent Rate mean?

(all compared to each other, from mortgage package?)



Lets take this Natwest example, on this chart.
http://moneyfacts.co.uk/buy-to-let/buy-to-let-mortgage/

Natwest, with 75% Deposit required.
Natwest rate 4.15%
Overall comparison per cost rate/ Reverting to 4.5%

Fixed rate.
considering if the first rate period is 2 years.
What happens after the 2 years to the monthly payment and the %?


so for a simple scenario:
if the first 2 year rate of 4.15% gives a monthly payment of £415, to be paid every month.

What happens after these 2 years?
What will the % be after this 2 years, and also the amount to pay? (in comparison to the £415)

Does this mean for 2 years the mortgage is a low rate, and after the 2 years the rate increases so the monthly payment increases too ?
- if so is this always the case ?

kingstreet

The APR is supposed to enable you to compare different products, as it takes the notional rate, any fees and costs and the rate which applies for the remainder of the mortgage term (normally the lender's standard variable rate) or what you are calling the subsequent rate.

TBH it's fine for short-term borrowing, but it really do not work for mortgages.

Brokers break down products into rate, fees/costs, follow-on (subsequent) rate and early repayment penalties in their sourcing of the best product for a particular borrower.

Get a key facts illustration for a particular product and you'll see what it all means.

Danny_G

TBH it's fine for short-term borrowing, but it really do not work for mortgages.

what do you mean by this

ACG

The APR takes into account everything and assumes nothing will change (ie you wont overpay, you wont change the term, you will go onto the SVR rate after your deal finishes and that rate will remain the same for the next 20 years).

Its pointless.

Have a look at the initial rate and the fees.
Take into account what the SVR rate is on the off chance it remains the same AND you cant move lenders/deals but dont base your decision on it alone.

amnblog

If anyone wants more info on APR, what it is, how it works, and how useful it is please PM me.