Do you know at what rate you negotiated your mortgage loan? Cool. Many people are not sure if they apply the annual interest rate or the CAT.
Your mortgage loan was calculated based on an interest rate and a rate called Total Annual Cost (CAT). The CAT is the value that most affects, therefore, if you are making decisions on mortgage credit, the key is to compare the CAT of banks and funds.
The annual interest rate
The annual interest rate is the cost of money is a period equal to one year. It is determined by monetary policies. Banco de México, according to macroeconomic indicators, raises or lowers rates. Financial institutions are free to set their own rates, but generally accept the policies of the central bank.
Bank rates are set by each entity. Supply and demand, their business strategies, their financial capacity are some of the factors that influence.
The total annual cost (CAT)
The CAT is equal to the interest rate plus the commissions and insurance that you will have to pay. By law, banks must announce with which CAT they will calculate loans and credit cards. That value you see in advertising is a weighted one, an approximate value of yours. The important thing when making a decision is to know the exact value that will apply to you.
Why is it important to know the difference between annual interest rate and CAT?
The intention of the standard is that you have fair and transparent comparison parameters. A bank may or may not charge more commissions than another. The point is not that. The point is how much you will charge for those commissions. And that, when buying, you can establish which rate suits you best. You know, at a lower rate, better business.
Banks charge commissions for
- Consult the Credit Bureau the status of each client.
- Socio-economic study when you apply for a credit or card
- Recruitment or opening of bank products.
- Granting of credit with funds.
- Collection expenses.
- Debtor replacement.
In addition to these fees, the CAT must include life and damage insurance.
Then, the CAT reveals all the real cost that your credit will have:
Annual interest rate + bank commissions + insurance.
With this information you can already make comparisons and understand the pictures presented by a credit and transfer broker. Now you know the difference between annual interest rate and CAT.