# Home Purchase: Calculation of effective interest rates and debit interest

It goes without saying that you have to pay interest on a mortgage loan. Few builders are aware, however, that the borrowing rate is only part of the cost.

Processing fees and payment methods can lead to significantly higher costs, which are expressed by the effective interest rate, the so-called APR. With our debit / effective interest calculator, you can quickly and easily determine how high the effective interest rate is. This will tell you how much credit or loan is actually going to cost you.

### Calculating the debit interest and the effective interest of the loan

Debit and effective interest rates are to be distinguished from each other and can also vary in height very different. Because the borrowing rate determines how high the interest on the loan is. The effective interest rate, ie the annual percentage rate, additionally takes into account all other outstanding and hidden costs that arise on the loan agreement and the terms of payment. Especially with larger loan amount, which are needed for mortgage lending, these additional costs are significantly significant.

### Our debit calculator and effective interest calculator

The following information is needed for the effective interest calculation:

• Loan Amount: This is the loan amount for which you must pay interest.
• Payout Price: The amount of the loan is not always paid out in full to the borrower. The bank can withhold a discount, which in a sense is to be regarded as an advance payment by the borrower. The amount of the discount has an effect on the borrowing rate and therefore also influences the effective interest rate. In order for these relationships to be taken into account, you must enter the payout in our loan calculator.
• Initial repayment: Although the payable loan installment usually remains unchanged over the entire term, its “composition” changes. Initially, much of the installment will have to be paid to pay interest, with only a small portion flowing into the eradication. However, the more that has been redeemed, the lower the interest burden. It can be repaid more and more. Our calculator also automatically considers this relationship when you enter the initial repayment.
• Debit Interest: Since the effective interest rate can only be reliably calculated in connection with a fixed debit interest rate, our calculator can only make a statement about the time of the debit interest commitment. For smaller sums, this period corresponds to the term of the loan agreement.
• Additional costs: The ancillary costs must include processing and other fees, which the bank must specify and list in its offer.

After you have entered this information into our interest calculator, you only need to click on the Calculate button: The annual percentage rate is already displayed.