CET — Total Effective Cost

The Total Effective Cost (Custo Efetivo Total, or CET) is the indicator that expresses, as an annual percentage, all charges and expenses involved in a mortgage loan — including the nominal interest rate, mandatory insurance (death and permanent disability, and physical damage to the property), administrative fees, and the financial transactions tax (IOF). The CET is mandatory and must appear on any financing proposal presented to the consumer, under CMN Resolution 4,881/2020 (which repealed CMN Resolution 3,517/2007 as of 02/01/2021).

• Components of the CET in mortgage loans:
  • Nominal interest rate (e.g., inflation index (IPCA) + 7.5% per year, or reference rate (TR) + 10.5% per year)
  • MIP insurance (death and permanent disability) — mandatory, calculated on the outstanding balance
  • DFI insurance (physical damage to the property) — mandatory, calculated on the property value
  • Property appraisal fee and loan origination fee (when applicable)
  • IOF (reduced rate under the SFH housing finance system)
• Purpose: to compare proposals from different banks using a single standardized figure, preventing low nominal rates from masking high additional costs.
• Annual CET vs. nominal rate: the nominal rate advertised is always lower than the CET, since it excludes insurance and fees. The gap can run 1 to 2 percentage points per year, adding up to tens of thousands of reais over the life of the loan.
• Portability: when comparing proposals for loan portability, the CET is the correct benchmark — comparing only the nominal rate can lead to switching to a bank with more expensive insurance, wiping out the intended savings.

In Florianópolis, where financing amounts in the high-end market often exceed R$500,000, a 0.5% annual difference in the CET represents more than R$40,000 over a 20-year loan. Requesting the CET in writing and comparing at least two banks is essential practice for anyone financing a purchase.