It helps you compare the overall mortgage or secure loan costs from different providers against the same parameters. Some mortgages may have a low interest rate, but by the time you add in all the charges, it could work out to be more expensive, and the APRC helps borrowers see that.
For example, imagine you are buying a £150,000 house and have a deposit of £30,000. The APRC will help you compare two possible mortgages for £120,000.
- Loan A has a starting rate of 0.99% for 24 months that then increases to a standard rate of 4.99% for 23 years and set up fees of £2,366
- Loan B has a starting rate of 1.39% then moving to the higher a standard rate of 4.75% with no set up fees.
At a glance, it’s hard to work out if the lower initial rate compensates for the higher standard rate. Here's where the APRC allows you to make a comparison. Despite having a lower starting rate, loan A has a 4.5% APRC, while loan B comes in at 4.2% APRC so would be cheaper over the lifetime of the mortgage.
Any homeowner loan, secured loans, mortgage or second mortgage – all different names for loans that are secured against your home – will show an APRC. Don’t forget – there is a difference between a secured loan, where your home is at risk if you don't keep up the payments, and an unsecured loan.
You can compare mortgages and remortgage with Compare the Market.