Certificate In Mortgage Advice And Practice (CeMAP) 2 Practice Exam

The key idea is that APRC measures the true annual cost of borrowing over the life of the loan, using an assumption you keep the mortgage for the full term. It includes the interest and the costs you pay to obtain and maintain the loan, but it does not include costs that only come into play if you decide to repay early. Early repayment charges are excluded because they arise only if you pay off the loan before the term ends. Since APRC is meant to reflect the cost assuming you stay with the loan to the end, those early exit penalties would distort the measure if they were included. Other costs such as valuation fees or higher lending charges are part of the upfront or ongoing cost of obtaining and holding the loan, so they are included in APRC. Redemption charges that apply at the point of final repayment are specific to redeeming the loan and are not added into the ongoing annual cost, which is why the focus is on the charges that would affect the yearly cost if you continued to borrow.