What is Interest?

The best way to think of your mortgage interest is as the cost of borrowing the money to buy your home. The interest on every mortgage is made up of three different rates.

1. The Initial Rate

This is the interest rate you’ll be charged at the start of your mortgage. It’s usually a preferential rate given for a limited period as an incentive. When the introductory period is over, the interest on your mortgage will start being charged at the subsequent rate.

2. The Subsequent Rate

The name of this interest charge is pretty self-explanatory: it’s the rate you’ll be paying after the introductory period. This is most likely to be a standard variable rate (SVR), and it will fluctuate depending on the general trends in interest rates. SVR mortgages don’t usually come with a penalty for paying off your mortgage early or remortgaging with a different lender.

3. The APRC or The Overall Rate for Comparison

APRC is calculated using the initial and subsequent rates, plus any additional fees and charges. The overall rate therefore gives you an approximate idea of the total cost of your mortgage, although it’s worth bearing in mind that the subsequent rate is likely to change and this will affect the overall rate.

When comparing two or more mortgages, the one with the lower overall rate is usually your best bet. But once again, this may vary depending on your future plans and financial circumstances: if you like to move frequently, for example, you could be better off with a lower introductory rate. This is why it’s a good idea to discuss your options with our mortgage specialists.

Beside you all the way

At Zing, we’re here to help you throughout your mortgage application. From your first enquiry through to completion - we’re here to make the whole process easier for you.

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