APR
The annual percentage rate is the only figure that lets you compare mortgages from different banks fairly. The headline interest rate says too little on its own.
Short answer
APR is the total annual cost of your loan expressed as a percentage: the interest rate plus every mandatory cost the bank charges. Two loans at the same rate can have different APRs, and the cheapest is the one with the lowest APR, not the lowest rate.
APR converts every cost of a credit into a single annual percentage. It accounts not only for the rate but for when you pay: costs paid up front weigh more heavily than costs later in the term. That is why APR is always higher than the nominal rate.
The interest rate is only the price of the money borrowed. APR adds the file fee, the valuation cost and the premiums for insurance the bank requires. A bank advertising a low rate but charging €500 in file fees and an expensive life insurance policy ends up with a higher APR than a bank with a slightly higher rate and no strings.
It is by far the best single figure, with two caveats. APR assumes you run the loan to term: repay early and the comparison no longer holds. And for a variable rate, APR is computed as if the rate never moved, which by definition it does. So always compare variable formulas on their scenarios as well.
APR covers the cost of the credit, not of the purchase. Registration duty, the notary's fee for the purchase deed and that deed's administrative costs sit outside it. That is a substantial sum, often 5 to 15% of the price depending on the region, and you pay it from your own funds.
The cheapest, yes. The best, not necessarily. A loan with a slightly higher APR but more flexibility — free early repayment, the option to adjust the term, or a fixed instead of variable rate — can be worth more in your situation than a few tenths of a percent.
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Calculate your APRThe APR on your credit offer is calculated using the method prescribed by law. Our calculation is indicative and intended for comparing offers with each other.
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