APR is the annual rate used to measure the total cost of borrowing money, including interest rates, arrangement fees and other associated costs. APR is expressed as a percentage and is typically used to help consumers compare products from different lenders.
APR stands for Annual Percentage Rate. You will usually see APR advertised on any borrowing products such as loans, credit cards and mortgages. It is the official rate used for borrowing money and can be used to compare different credit and loan offers. All lenders are legally obliged to tell you what their APR is before you sign any agreements.
APR is calculated by taking a number of variables into account. These include:
When it comes to mortgages, APR takes into account the interest rate of the mortgage plus any up-front fees or additional charges such as arrangement fees.
While a nominal interest rate only refers to the interest charged on a mortgage, APR takes into account the nominal interest rate plus all extra costs involved in procuring the mortgage.
If you take out a mortgage of £300,000 with an interest rate of 3%, your annual interest cost would be £6,000, or a monthly cost of £500. Now factor in the additional mortgage costs, which could total £3,000, and you will have a total mortgage cost of £303,000.
Applying the 3% interest rate will then give you a new annual mortgage cost of £9,090. Calculating this new annual cost as a percentage of your original mortgage amount of £300,000 will give you your APR of 3.03%.
Investing in a buy-to-let property with tenants already in place (like most the properties listed at Vesta) ensures rental income from day one.
Witham & Colchester
Liverpool. L36 8DX
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