What is TAC and why is it important?
When looking for a mortgage in Quebec, understanding the APR (Annual Percentage Rate of Borrowing) is essential to making an informed decision.
In this article, we will explain what APR is, why it is crucial, and how to calculate it to optimize your mortgage choice and better manage your budget.
What is TAC?
The APR is a more comprehensive measure of the costs associated with a mortgage, taking into account not only the interest rate, but also other fees (closing costs). This gives you a more accurate picture of the expenses you will incur when you take out a mortgage.
APR vs. interest rate
The interest rate is the initial cost of borrowing, while the APR includes the interest rate as well as the charges associated with accessing the loan.
The APR is therefore generally higher than the interest rate.
How to calculate the TAC
To calculate the TAC, you will need the following information:
- Periodic interest rate on the loan
- Total principal amount of the loan
- Number of days in the repayment period
- Amount made in monthly payments on the loan
- Interest and fees charged over the life of the loan
- Applicable discounts
The basic formula is: ((Fees + Interest) ÷(Principal) ÷ (Number of days to term) x 365) x 100
The APR is an essential tool for comparing mortgage offers and understanding the true costs associated with borrowing. By taking the APR into account, you will be better informed to make an informed decision on the mortgage that best suits your needs and financial situation. Mortgage Brokers at Mortgages.ca are here to provide you with personalized advice and to optimize your mortgage experience.
