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APRC versus Interest rate

  • 04-10-2020 2:22pm
    #1
    newhouse87
    Registered Users, Registered Users 2 Posts: 2,747 ✭✭✭


    Is it not misleading for a mortgage provider to say 2.7% interest rate fixed 1 year and then it says 4.4% aprc in the corner. On a 210k mortgage for one year am i essentially paying 4.4% rather then the 2.7%?


Comments

  • #2
    coylemj
    Registered Users, Registered Users 2 Posts: 25,622 ✭✭✭✭coylemj


    I'm not sure it's possible to legislate in this area. You see it all the time with TV sports subscriptions - so and so service for €10 a month and in the small print it says €50 a month after three months.

    Caveat Emptor


  • #3
    newhouse87
    Registered Users, Registered Users 2 Posts: 2,747 ✭✭✭newhouse87


    Big difference between the 2, though it was ok deal until i copped that. Does anybody know is it only interest paid on what you actually draw down, e.g if i drew down last 80k after 9 months would i only pay interest on that 80 for 3 months.


  • #4
    coylemj
    Registered Users, Registered Users 2 Posts: 25,622 ✭✭✭✭coylemj


    newhouse87 wrote: »
    Big difference between the 2, though it was ok deal until i copped that. Does anybody know is it only interest paid on what you actually draw down, e.g if i drew down last 80k after 9 months would i only pay interest on that 80 for 3 months.

    From what you said in the first post, you would only be paying 2.7% interest on money you draw down in the first 12 months. And if this is a self-build and you drew down 80k after 9 months then yes, you would probably pay 2.7% interest on that for the last three months, then you'd move on to the higher rate. I doubt that they would give you a rolling 12 months rate of 2.7% for each new tranche, it would be a nightmare to administer. But check the terms and conditions, anything is possible.

    A low interest rate for the first xx months will usually involve you signing up for a minimum period beyond that. Otherwise, people could simply hop from lender to lender while availing of introductory rates.


  • #5
    newhouse87
    Registered Users, Registered Users 2 Posts: 2,747 ✭✭✭newhouse87


    i have agreed a 1 year fixed term at 2.7% but looking at boi website it has 4.4 aprc in the corner so now im not sure what im paying, i will be clearing the mortgage after 1 year, only getting one to avail of the help to buy scheme.


  • #6
    TheChizler
    Registered Users, Registered Users 2 Posts: 9,514 ✭✭✭TheChizler


    coylemj wrote: »
    Otherwise, people could simply hop from lender to lender while availing of introductory rates.
    Legal fees usually mean it doesn't make sense to do that every time you finish an introductory period.


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  • #7
    TheChizler
    Registered Users, Registered Users 2 Posts: 9,514 ✭✭✭TheChizler


    newhouse87 wrote: »
    i have agreed a 1 year fixed term at 2.7% but looking at boi website it has 4.4 aprc in the corner so now im not sure what im paying, i will be clearing the mortgage after 1 year, only getting one to avail of the help to buy scheme.

    The APRC is the estimated rate over the lifetime of the loan, so if you have a 30 year loan with a low rate for the first year and a higher standard rate for the next 29 the APRC will be the "average" rate over the 30 years which will be much closer to the standard rate. If you clear the loan over the first year only the lower rate will be applied.


  • #8
    newhouse87
    Registered Users, Registered Users 2 Posts: 2,747 ✭✭✭newhouse87


    TheChizler wrote: »
    The APRC is the estimated rate over the lifetime of the loan, so if you have a 30 year loan with a low rate for the first year and a higher standard rate for the next 29 the APRC will be the "average" rate over the 30 years which will be much closer to the standard rate. If you clear the loan over the first year only the lower rate will be applied.

    i hope you are right, i was told im getting 2% cash back so i had worked out i would be only paying 1500euro approx interest for the loan for the year.


  • #9
    TheChizler
    Registered Users, Registered Users 2 Posts: 9,514 ✭✭✭TheChizler


    newhouse87 wrote: »
    i hope you are right, i was told im getting 2% cash back so i had worked out i would be only paying 1500euro approx interest for the loan for the year.
    The bank should give you a breakdown of the repayments which should have different rates at the different times.

    Double check there's no penalty for paying off the loan after one year, normally is with these introductory rate and cashback loans.


  • #10
    newhouse87
    Registered Users, Registered Users 2 Posts: 2,747 ✭✭✭newhouse87


    TheChizler wrote: »
    Double check there's no penalty for paying off the loan after one year, normally is with these introductory rate and cashback loans.

    they said its up to me, most people dont do it she said but its allowed.


  • #11
    coylemj
    Registered Users, Registered Users 2 Posts: 25,622 ✭✭✭✭coylemj


    newhouse87 wrote: »
    they said its up to me, most people dont do it she said but its allowed.

    I hope you have that in writing, otherwise it's not worth the paper it's written on ;)


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  • #12
    Trish56
    Registered Users, Registered Users 2 Posts: 1,256 ✭✭✭Trish56


    The APRC should be clearly explained on your loan offer. It is calculated over the full term of the mortgage and not the 1st year so you're paying 2.70% for 1st year and BOI standard variable rate mortgage is 4.50% and the remaining term is calculated at this rate hence 4.40% aprc. After your one year fixed rate is up you have the option to pay off a lump sum and then go fixed again or apply for a loan to value rate which is lower than the standard variable rate of 4.50%.
    newhouse87 wrote: »
    Is it not misleading for a mortgage provider to say 2.7% interest rate fixed 1 year and then it says 4.4% aprc in the corner. On a 210k mortgage for one year am i essentially paying 4.4% rather then the 2.7%?


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