The nominal rate of your loan corresponds to the rate offered by the bank after analyzing your file. However, this rate only represents part of the costs related to your mortgage, and the rate changes depending on the period, as you can see on our barometer of mortgage rates. If you want a more precise indicator, there is the APR. The annual percentage rate of charge (APR) is an indicator of the total cost of your real estate financing. It includes the interest rate of your bank loan, insurance, file fees, or any other cost related to your mortgage. It is expressed as an annual percentage of the amount borrowed. It is therefore a very practical tool for having an overall view of the cost of your credit. Good to know, the APR has replaced the TEG (total effective rate) since the end of 2016. TAEG, TEG, fixed, revisable: definitions to see more clearly Definition of APR The annual percentage rate of charge, or APR, is an accurate indicator of the cost of financing your mortgage or consumer credit.
It is expressed as an annual percentage of the amount borrowed and requires more importance than the nominal rate. Thus, the APR includes various elements such as: the nominal rate used to calculate the interest on a loan the cost of insurance warranty costs administrative fees considered between 1 and 1.5% of the loan amount other costs that may be imposed (such as the purchase of shares for example) annual account fees Love is in the Loan The Pretto Podcast In 2h30, by car, at the office, or while cleaning, whatever your preferences: you will soon be a real estate loan ace Fixed APR vs reviewable APR Depending on your project, you can opt for a fixed rate or an adjustable-rate. We explain the difference to you. Fixed APR The fixed APR is constant throughout the loan: it allows you to have constant monthly payments over the entire loan period. This is the most popular option because it allows better security and better visibility for the years to come. Reviewable APR You can also opt for a variable rate APR to benefit from possible rate cuts. Your monthly payments can then vary upwards or downwards according to a reference indicator. This is often Euribor. What is the difference between TEG and TAEG? The TEG (Global Effective Rate) is the old measure that allowed you to assess the cost of your mortgage. Since the end of 2016, it has been replaced by the more representative Global Effective Annual Rate. Important You should know that the APR present at the time of the agreement in principle is not final. Indeed, before it is certain, you will need to know precisely the cost of the guarantee and the insurance, which are then not known. The bank, therefore, makes an estimate. It is on your loan offer that you will have access to the final APR since you can only obtain this document after validation by the guarantee organization and the insurance (whether it is an external delegation or insurance offered by the bank). APR and current wear rate The APR also ensures that your loan does not exceed the rate of wear. This is the maximum rate that the bank is authorized to charge when granting loans. In order not to be considered abusive, the APR must be less than 1.3 times the average effective rate practiced the previous quarter. If the amount of your APR is higher than the rate of wear, the bank will not be able to validate your request for financing. This wear rate is thus set by the Banque de France at the end of each quarter for the following quarter. It varies according to the amount borrowed and the duration. The wear rate can be reached if the costs associated with your loan are too high, for example, if your insurance rate is high. By going through a broker, you put the odds on your side to limit these costs! APR calculation Can you calculate your APR yourself? The objective of the APR is to make the cost of a loan easily readable thanks to a single indicator. This allows you, for example, to choose between different offers from competing banks whose conditions are not directly comparable. Its calculation is therefore obviously very standardized and leaves no room for improvisation. The APR thus includes traditional interest, fees, taxes, commissions, and remuneration of any kind, thus making up the overall cost of your loan. In detail, the APR is calculated from: the nominal rate of your credit application fees the cost of insurance the commission paid to the banking intermediary warranty costs account management fees brokerage fees the subscription of shares if the bank requests it If you wish to know the exact mathematical formula used, you can consult it in article R. 314-3 of the Consumer Code. However, this calculation is complex: you can easily calculate your APR or simulate the APR of your different mortgage loan offers using online calculation tools. How to lower the APR? The bank cannot accept your credit request if your APR is higher than the rate of wear. There are then several ways to lower your APR. Your main lever is the rate of your mortgage. Remember to present your file in its best light: savings capacity, contribution, additional income, borrowing scenarios optimized over time. You can then play on the additional costs, starting with the borrower insurance. By delegating it to another organization or by competing, you can get a better rate. If you buy two, the calculation of the insurance premium will be based on the state of health of the two borrowers. If one is a smoker and the other is not, or has health issues, this can impact the cost of insurance. By playing on quotas or by playing competition between insurance organizations, you can lower your APR at the margin. Administrative fees are also included in the APR, it’s up to you to negotiate them. A banker or insurer may have an interest in you signing your credit, even if it involves an effort on their part. APR and legality The APR is a legal element that aims to protect the consumer by guaranteeing transparency between banking establishments. The bank must imperatively provide you with the APR corresponding to its offer. If she does not, she faces a fine of €150,000. Is the mention of the APR mandatory? Before your loan subscription, the bank provides you with an information sheet. The mention of the APR on this form is mandatory. In the event of a breach, the credit institution loses all rights to interest: the legal interest rate replaces the negotiated interest rate and the bank reimburses you for the difference. Can we dispute his APR? If you wish to contest the calculation or the amount of your APR, you have a legal period of 5 years. However, an error in the calculation of your APR is not enough to dispute your credit. You must prove that you have suffered damage for the legal interest rate to come into effect instead of the interest rate of your credit.