The mortgage terms and formulas. Effective interest rate.
When people went to the bank, he drew attention to the interest rate, called the bank. This naturally: overpay for the use of credit nobody wants. And commit great mistake. Because the interest rate banks declared differs from the one on which the borrower actually pays. The fact is that in many banks there are additional commissions: somewhere there is a commission for issuing credit, somewhere, for the conduct of loan accounts.
How to calculate what the program really profitable?
This is done by using the effective interest rate, it can objectively compare the profitability of a loan.
There are different definitions of the effective interest rate. I believe that such a definition is best: the effective interest rate is the annual interest rate on the loan, taking into account all costs incurred during the use of credit.
Call your attention that because when calculating the effective interest rate takes into account all fees and commissions banks, it is very important to the amount of time that you use credit.
* For example, the commission for issuing credit in the amount of 1000 dollars, when the amount of credit to 100000 dollars, may increase the rate of interest on: 365% if the loan enjoyed only one day;
* 0.1% if the loan enjoyed 10 years.
Now veselimsya because: to calculate the effective interest rate, there are many ways. Imagine that you BANK 1 said that the effective rate of interest in their bank is 16%, while Bank BANK 2 employees were told that they had an effective interest rate of 20%.
Does this mean that the bank loan in the first profitable than in the second?
Not at all: they may have felt differently interest rates.
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Mortgage: terms for market participants usage
