## Through banks your dream house will come true.

In order for the dream of owning a home to come true, many need financial support from banks. Anyone applying for a loan from the bank must pay interest on the loan to the lender. The loan interest is the remuneration for the bank, so to speak.

The amount of interest depends mainly on the level of interest at the time of the loan application, the amount of the loan, the term of the loan and the existing equity.

Loan interest can either fall due at the end of a year or be paid in connection with the repayment. This is usually done in the form of monthly installments, which consist of a repayment and an interest component.

The borrowing rate only shows the interest accruing on the loan amount that the borrower has to pay. The effective interest rate, on the other hand, contains, besides the borrowing rate, other elements such as fees for provision, processing fees and other factors.

For example, the effective interest rate increases with the duration of a loan. The legal basis for charging loan interest is § 488 BGB (German Civil Code).

- Anyone who is informed about various loan offers should not only consider the borrowing rate, but above all the effective annual interest rate, since it is the more important and objective tool for a comparison. Banks are legally obliged to state the effective interest rate already calculated in their offer. The legal requirement for this can be found in Section 6 (1) of the Price Disclosure Ordinance (PAngV).

## Have mortgage lending.

With such financing, every decimal point is important. Payment rate (if a discount has been agreed)

- Additional costs (if they are not included in the effective interest)

Assuming a loan amount of 50,000 USD for the calculation of the debit interest, for which an effective interest of 3.89% is charged. The borrowing rate is fixed for 20 years, monthly payments and an initial repayment of 2% are agreed. The payment rate is 100% and there are no additional costs.

According to the interest calculator, a borrowing rate of 3.82% is then incurred, so the difference to the effective interest rate is at least 0.5%. The calculator can also calculate the effective interest rate; you only have to enter the tied debit interest rate instead of the effective interest rate.

Finance your construction project or property purchase with the help of bank loans. Those who choose this financing must first compare the individual offers. Even small differences in the amount of the loan interest can decide between the feasibility or impossibility of a construction project. Here is a small comparison calculation:

Loan A | Loan B | |
---|---|---|

Loan amount | $ 100,000 | $ 100,000 |

interest rate | 2.25% | 2.75% |

monthly rate | $ 750 | $ 750 |

total cost | $ 115,000 | $ 119,200 |

This sample calculation shows how much interest can be saved if the interest rate is only 0.5% lower. It is therefore always worthwhile to calculate the loan interest before the conclusion.