Question about the effective annual interest rate

Planned procedure:
1. Have the drawing completed
2. Have the trades prepare offers
3. Calculate the loan with the estimated total costs
4. Obtain offers from various banks
Compare the nominal interest rate, effective interest rate, and have the costs included in the effective interest rate documented.

(Für mich [ganz allein meine Meinung] sollten im eff. JZ nur die Kosten für den Bausparvertrag sowie alle Bankgebühren enthalten sein, also Kontoeröffnung, Kontoführung, Abschlussgebühr. Was soll der Mist mit Gerichtskosten und Risikolebensversicherung).

What’s the nonsense with court costs and life insurance?).

If that is nonsense to you, that’s your business. According to the law, these costs must be shown. A registered land charge for your loan is simply connected to the financing.

Why on earth does a fee that doesn’t even belong to the property value get included in the effective interest rate?

The fees for registering the land charge must be included by the bank in the effective interest rate calculation, since it basically serves the bank itself. Without the bank, you wouldn’t have to register a land charge. If Bank A now, for example, for whatever reason, wants less security aka land charge from you than Bank B, the effective interest rate at Bank A is lower under the same loan conditions. Some banks even include the residential building insurance in the effective interest rate.

As already mentioned, all this is due to the new residential mortgage credit directive. Unfortunately, not all banks are implementing this yet. If your banks had done so, you would have already had a breakdown of the relevant costs with the offer.

The problem is simply that the whole thing has become even more opaque due to the new legislation, since the banks calculate with different costs.

When I started, I tried to compare the total costs. The effective interest rate is then relatively irrelevant if I know that I have to repay XXX€ with offer 1 and YYY€ with offer 2. You just have to set the same monthly installments, because otherwise you would be better off with the one with the higher rate. Most people just don’t do that because then they see that they have to repay 480,000€ for their 300,000€ loan.

No. It has become more transparent. All costs are included in the effective interest rate that you are required to pay the bank. Otherwise, banks could advertise low interest rates but force you to take out expensive insurance policies with their institution, etc.

That is quite a statement. But somehow it’s unfortunate for Bank A if Bank B does not require all the insurances to be taken out necessarily with them. Or is it also legally regulated which insurances must be necessarily included in the effective interest rate, even if you don’t have to take out the insurance necessarily with the bank?