What to consider when calculating interest
When choosing a loan, hidden costs must be determined and taken into account. To find the cheapest financing for their home ownership, builders should visit several banks or study various offers on the Internet. Only those who ask will receive an offer, which they can then compare with other offers. Most of the banks’ loan offers are very different.
A loan with long terms, high interest rates and low rates can hardly be compared to a model based on short terms, a lower interest rate and high rates. It is therefore worthwhile to put together the most important key points before you go to the bank. These include: the exact amount of the loan, the maximum possible monthly installment, the desired rate fixation and extra requests such as the right to special repayments.
Calculate interest using a formula
If you want to calculate your interest without an interest calculator, you can do this with a simple formula: Simply take the capital times the interest rate and divide by 100. However, it is important to take into account that there may be additional expenses in addition to the interest and that the interest rate is usually variable.
If you want to be on the safe side, you should take the highest likely interest rate to be expected when calculating the interest. Because it is always better if the reality in the form of a credit differs from the calculated result than in the form of a higher payment obligation.
Borrowing rate, nominal rate and effective rate
Most offers speak of a debit or nominal interest rate and an effective interest rate. The borrowing rate is a “bare” interest rate that forms the basis for the loan and is payable annually. However, it is completely unsuitable for comparing different financing offers because the borrowing rate does not include any additional costs.
And there are a lot of them: processing fees, brokerage commissions and the discount (discount) that is withheld from the agreed loan amount. The debit interest and the ancillary costs are summarized in the effective interest. Accordingly, this interest rate should be compared when comparing loan offers and should be the basis of a loan calculator.
What should also be considered when calculating loan interest
A comparison of the effective interest rates of several institutions gives the rough direction for a decision. However, if you want to know exactly, you must also ask your bank about the costs that are incurred in addition to the effective interest rate. This includes account management fees, commitment interest and partial payment surcharges if the loan amount is called up in several tranches. As a rule, the credit institutions do not show these fees in their offers.
Choose fixed interest rates correctly
In most cases, a loan alone is not enough to finance the property. A second one is then required for redemption at the end of the fixed interest period. The choice of the fixed interest period determines the security of a loan. In a phase of low interest rates, it is worthwhile to secure the favorable interest rate level in the long term. For market participants who strive for a high degree of planning security, it is advisable to conclude the longest possible fixed interest rate with more than ten years. In this way, they become independent of any inflation-related market turmoil.
Long-term security costs a little more, but the current markups are still reasonable and moderate. Loans with a fixed interest rate of 15 or even 20 years are quite attractive when interest rates are low. The small premium for the long fixed interest rate is negligible. If the interest rate level continues to fall, borrowers still have the option to terminate the loan extraordinarily after ten years.
Tip: The remaining debt that remains at the end of the first fixed interest rate offers a good benchmark for different loan offers. Of course, this only applies if the repayment rate is identical.
Find out whether building savings is worthwhile by calculating the interest
When saving, interest has the advantage that there is compound interest in addition to the daily interest. The annual interest is added to the savings assets using the compound interest calculator and this sum will be paid interest next year. Due to the relatively high KESt, the interest income is not exhilarating, but it is still worth more than bunkering the cash at home. In some savings models, compound interest is even granted for the monthly interest. In general, a savings book with a certain savings deposit including savings interest is an important security in order to get a loan from the bank. Saving is always worthwhile.
Calculate the default interest
Borrowers should not be in arrears with payment arrears, as the late payment interest can be enormous, as a late payment calculator can prove. In Austria, up to five percent is possible in addition to the agreed interest, ie a maximum of six percent yields a total of eleven percent. The reminder fees have not yet been taken into account.
Why it is worth taking out a building loan now
The low interest rates have a relatively positive effect on borrowers. Many lenders are satisfied with about three percent interest. However, these are variable interest rates. Since the key interest rate can hardly fall any further, such cheap offers will probably not be as common in the future. If not in the near future, an increasing interest rate level is expected. For Häuslbauer who want to take out a loan now, it is recommended to agree on a fixed interest rate if possible. Although this is currently higher than the average interest rate, the agreed interest rate is secured in the long term. This also enables a more specific repayment schedule.