Tell a friendAAPR, compulsory comparison rates - mind your step
A quick poke around any mortgage magazine or web site will often reveal a variety of different interest rates for you to consider, compare and digest. Of course, most people understand the interest rate to be the wrong place to start, but it is the wrong place to finish as well.
Because lenders constantly play games when competing for your business, a financial information aggregation service invented an Average Annualised Percentage Rate or AAPR to help consumers get to the bottom of interest rate trickery. Government also became concerned at the games lenders played in luring you with honeymoon rates and a range of other tricks that they have developed over time with an enormous budget (ever seen a poor lender?) and a gift for numbers.
The road to hell is paved with good intentions
Consequently, the Government legislated a formula to calculate what is called a Comparison Rate, Compulsory Comparison Rate or CCR. The problem with the formula is it contains variables that can be added and omitted at the discretion of the lender, so while you may THINK all comparison rates were created equally, you are mistaken. If you would like to see a real life example, check the facts of the comparison rate caution in the mortgage essentials section of this site.
Do you get paid in percentages
Even if you work for percentages of profit, you will get paid in dollars and cents. When you buy your food, fuel and clothing, you also use dollars and cents. When you buy your property, you will pay for it with dollars and probably lots of them. It seems obvious that we value everything we spend money on in, you guessed it, dollars and cents. Why then would you compare mortgages in percentages?
Features first, cost second, rate never
Once you have worked out the features you need to make the most of your mortgage, the next stop is to sort options that meet your need into least to most expensive. A mates rates broker will identify the likely costs of a range of different lender solutions for you and will also be able to assess the likelihood of a successful application, so you don't waste time on mortgage pipe dreams.
The interest rate is important, however only in so far as it affects the overall cost of your mortgage which also includes a myriad of once off and in some cases, ongoing fees. Make sure you get the full picture and compare on cost.
