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Does one pay the interest rate or APR?

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  • 14-03-2015 1:55pm
    #1
    mickman
    Closed Accounts Posts: 4,661 ✭✭✭


    Guys

    Aib 3 year fixed is 3.8% but apr is 4.15 - which one is the one you end up paying? I currently have a variable with aib and would like to switch for a good rate


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    #2
    P. Breathnach
    Registered Users Posts: 12,089 ✭✭✭✭P. Breathnach


    The APR is the true interest rate.

    Sometimes there is a small difference between nominal rates and APR, but in longer-term loans such differences are usually tiny. The difference you report looks surprising to me.


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    #3
    jon1981
    Registered Users Posts: 4,359 ✭✭✭jon1981


    OP you're mixing variable with fixed i think. Where are you seeing that?

    i can't see it here

    http://personal.aib.ie/our-products/mortgages/mortgage-interest-rates


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    #4
    P. Breathnach
    Registered Users Posts: 12,089 ✭✭✭✭P. Breathnach


    jon1981 wrote: »
    OP you're mixing variable with fixed i think. Where are you seeing that?

    i can't see it here

    http://personal.aib.ie/our-products/mortgages/mortgage-interest-rates
    It is indeed there, but for the two-year fixed rather than the 3-year. But the headings on the table are confusing.


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    #5
    Idioteque
    Registered Users Posts: 622 ✭✭✭Idioteque


    My understanding is that you pay the listed rate (3.8%) in your example.

    The APR rate is to allow you to compare similar mortgage products between banks as it should include most of the charges (admin, processing fees etc.) the bank adds on at the start and throughout the life of the mortgage.

    It's not perfect but APR is a generally good quick indicator of value between mortgages.

    Example:
    Bank A: Listed fixed rate @ 3.8% (APR @ 4.1%)
    Bank B: Listed fixed rate @ 3.6% (Apr @ 4.3%)

    If the rates stayed the same for the lifetime of the mortgage (unlikely), then Bank A is the better value mortgage but with Bank B you would see less come out per month on the lump sum, they'd just have made you pay other charges in addition to monthly payment that make Bank B more expensive over the lifetime.


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    #6
    mickman
    Closed Accounts Posts: 4,661 ✭✭✭mickman


    So guys currently in paying 4.25%. My question is what rate will I be paying if I go for the two year fixed ?

    3.8% or 4.16%

    I am 7 years into a 25 year mortgafe with Aib. Not sure if this is relevant to these costs / admin etc


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    #7
    Idioteque
    Registered Users Posts: 622 ✭✭✭Idioteque


    3.8%


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    #8
    mickman
    Closed Accounts Posts: 4,661 ✭✭✭mickman


    Idioteque wrote: »
    3.8%

    Ok thanks


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    #9
    phormium
    Registered Users Posts: 3,310 ✭✭✭phormium


    Ask for the CPT, cost per 1,000 borrowed over the term and rate. That's the bottom line really and gives a better comparison I think.


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