For the purpose of home loans, the TAE or Annual Effective Rate corresponds to the annual cost of the bank loan, depending on the amount owed.

TAE accounts for costs associated with the loan application such as interest, process expenses and commissions. However, TAE does not reflect charges for insurance and other products associated with home loans.

It is normally used as a benchmark for comparison between banks, as it allows a more accurate analysis of the total cost of interest associated with mortgage loans.

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