The law on mortgage credit has changed. There will be an annual cost percentage or APR for home loans. This is already the case for consumer credit. What is this now? An APR? What does it mean for your mortgage loan?
What is an APR or annual cost percentage?
An annual cost percentage or APR for home loans is a percentage that represents the total cost for your mortgage loan.
With the APR, the legislator wanted to make an instrument that gives you a correct picture of what your mortgage loan costs in total. So what you have to pay annually. A bit of an “all in” formula for mortgages.
Together with a standard ESIS document, this should allow you to make a transparent comparison between the various home loan providers.
More than a rate for your home loan
The APR therefore gives a total cost price. It is therefore more than the rate for your home loan. This rate for your mortgage loan is only one component of the APR.
Furthermore, the annual cost percentage also includes:
- The premiums for your debt balance insurance,
- The premiums for your fire insurance
- The costs of the notary.
It is very complicated to simply display this.
APR is not the same as the profit for the mortgage lender
The annual cost percentage is therefore much more than the rate for your home loan. It is a cost. This immediately shows that the APR is not the same as the profit for the mortgage lender. On the contrary.
It is a big misunderstanding to think that.
Will JKP promote transparency for home credit?
This is a good question. Will the annual percentage rate increase transparency? Is it going to become clearer to you?
There is doubt about this. Two examples show this immediately.
- Some risky mortgage loans, such as a fixed-term home loan, would receive a lower APR than a traditional home loan. If you then only pay attention to the APR and choose the lowest APR, you may sometimes be faced with surprises.
- One of the other components of the APR is fire insurance. But what premium do you put in the APR? A full option fire insurance (with coverage of furniture, glass breakage, theft, …) or only the coverage of the “bricks”.
Get assistance from a mortgage broker
You can see that the APR is a bit more complicated than it appears at first sight. It is a step forward to transparency, but it remains complex.
Therefore, let yourself be assisted by a credit specialist. A credit broker in mortgage credit. Ask today for the details of a credit broker in your area.