The APRC and its meaningfulness for the client
The APRC, i. e. the Annual Percentage Rate of Charge, is an indicator of a loan’s advantageousness. A fairly complex formula is used to calculate it, it can be found at:
Generally speaking, the higher the APRC, the more expensive the loan is. Is that really true?
The APRC is calculated at the time of concluding the contract. It must take into account the interest rate and other related costs, i. e. the loan processing/granting fee, compulsory insurance, aliquot interest and other regular fees.
The calculation does not include: penalties in the case of non-payment of the loan, voluntary insurance, fees for the transfer of money in installments to the loan account. It is important to say that the interest rate is likely to change several times over the maturity of the mortgage. However, the APRC does not take this into account and is calculated based on the current rate at the time of granting the mortgage loan. An important factor is that variables such as aliquot interest are also included in the APRC calculation. It is the interest from the date of the loan drawdown to the date of the normal installment. Let’s say you make a payment on the 20th, that is, your installment is for the period from the 21st day of the current month to the 20th day of the following month. However, your loan was drawn down on the 15th, so you must also pay the bank for interest for the aliquot period from the 15th to the 20th day of the month.
And there is a difference.
In the APRC calculation, the bank may take into account the aliquot interest for one day, but also 30 days. The APRC calculation does not include the expert report fee, although some banks require it.
Another item that does not enter the APRC calculation is the current account maintenance fee. It is not obligatory to repay the mortgage from the account in the same bank, but if you open it there, you will get a better rate.
Another item is the property, household and loan insurance. For this, the bank will also reduce your rate, or provide other benefits. These and many other items do not enter the APRC calculation, unless they are directly stated in the loan contract.
So can you compare the advantageousness of a mortgage?
The fixation rate is most likely to change, so I only compare the costs for the first fixation period. Let’s say the client chooses a 3-year fixation, so I’ll calculate how much he or she will pay the bank for interest for the first 36 months and add the processing fee, cadastral fees, insurance payments, current account maintenance fee, expert report fee, etc. (I will take into account all fees charged by the bank in connection with the loan but also in relation to the other products attached to the loan). I also compare the loan balance after the first fixation period. When we sum up and compare all of this, we suddenly find that the most favorable mortgage loan is not always the one with the lowest interest rate.
KAMAPRO s. r. o., 24.11.2014
Find out how much your monthly payment will be
with 2% p. a.
with 3% p. a.
with 4% p. a.
with 5% p. a.
with 6% p. a.