The APRC (annual percentage rate of charge, RPSN in Czech) adds compulsory fees and insurance to the interest rate and expresses the whole lot as a single annual percentage. The interest rate alone tells you what the borrowed money costs, and your payment is calculated from it. That is why the APRC is always higher than the rate, even if the bank does not charge a single koruna in fees.
A mortgage at 5.00 % with no fees at all has an APRC of 5.12 %. The gap comes from monthly payments: interest is charged twelve times a year, and the APRC converts it into an effective annual rate. Add the usual costs of a valuation and registering the lien, and the APRC on CZK 4,000,000 over 25 years comes to roughly 5.13 %.
What is the difference between APRC and the interest rate?
| Interest rate | APRC | |
|---|---|---|
| What it answers | what the borrowed money costs | what the loan costs with everything you must take with it |
| What follows from it | the size of the annuity payment | nothing; it is only for comparing offers |
| Includes fees | no | yes, the compulsory ones |
| Where you find it | in the offer, the price list and the contract | in the pre-contract information (ESIS form) and the contract |
| Period it covers | until the fixation ends | calculated as if the terms applied for the whole loan term |
You cannot work out the payment from the APRC. If a bank quotes a rate of 5.00 % and an APRC of 5.13 %, your instalments are based on 5.00 % and the fees are paid separately. The APRC is a yardstick for comparison, not a price you will ever see on a statement.
What does the APRC include and leave out?
What goes into the APRC is set by § 133 of the Consumer Credit Act. Put simply, it covers everything you have to pay to get the loan on the terms offered:
- interest,
- the arrangement fee and loan administration fees,
- the property valuation (odhad), if the bank requires one,
- insurance and a current account, if they are a condition of the loan or of the rate offered.
Left out are costs that arise only if you breach the contract (contractual penalties, default interest) and fees you would pay even without the loan. A typical example is the administrative fee for registering your ownership in the land registry (katastr). Voluntary insurance whose price is stated separately in the contract is often missing as well.
That creates a practical trap. If the bank gives you a rate discount for insurance that is formally optional, its cost may not appear in the APRC, and the offer looks cheaper than what you will actually pay. How insurance discounts are worked out is covered in How to negotiate a lower mortgage rate.
For a short definition, see what APRC means in our glossary.
How is the APRC calculated on a mortgage?
The APRC is the annual rate at which the present value of everything you pay the bank (payments, fees, compulsory insurance) equals the amount you borrowed. It is calculated with the formula in annex 1 of the Consumer Credit Act as if the loan ran for its full term at an unchanged rate (§ 134), and it counts only the costs the bank knows about that are a condition of the loan or of the rate offered (§ 133).
Even with no fees the APRC comes out above the rate, because interest is charged monthly. A rate of 5.00 % gives an APRC of 5.12 %: one plus 0.05 divided by twelve, raised to the twelfth power, minus one. Each compulsory fee then adds a little on top.
The APRC assumes you stay for the full term
The law (§ 134) requires the APRC to be calculated as if the loan ran for its full term and the rate did not change after the fixation. A one-off fee is thus spread over 25 or 30 years. In reality you will renegotiate the rate after a five-year fixation and may well refinance elsewhere, having paid the whole fee up front.
For fixations of 5 years or more, the bank therefore also states a supplementary illustrative APRC in the ESIS. It counts only the fixed period and assumes you repay the rest of the debt when that period ends (§ 134(3)). If you do not see it in the offer, ask for it. For comparing offers with different fees it is more accurate than the headline APRC.
How the APRC can flip the ranking (CZK 4,000,000 over a 25-year term, 5-year fixation; valuation and lien registration CZK 7,000 at both banks):
- Bank X: rate 4.89 %, arrangement fee CZK 25,000, payment CZK 23,128. APRC over 25 years 5.09 %, over the fixation 5.20 %.
- Bank Y: rate 5.00 %, no arrangement fee, payment CZK 23,384. APRC over 25 years 5.13 %, over the fixation 5.16 %.
On the headline APRC, X wins. Over five years, though, you pay CZK 956,600 in interest and fees at X and CZK 953,200 at Y. If you leave when the fixation ends, X is the worse deal. Both figures use the annuity formula and the same assumptions for each offer.
The difference in koruna is small here, but it shows the principle. The higher the one-off fees and the shorter your stay with the bank, the more the headline APRC flatters an offer.
How to use the APRC when choosing
- Ask for the APRC on every offer, calculated for the same amount, term and fixation. A different brief gives a different number.
- Ask which insurance and which account are included in the APRC. Anything left out that you will pay anyway, add yourself.
- For fixations of 5 years or more, compare the supplementary APRC for the fixed period as well.
- Treat differences of up to about 0.05 pp as a tie. The choice then comes down to how flexible the contract is: extra repayments, discount conditions, the drawdown deadline.
- Do the final comparison in koruna over the fixed period. The individual fees are listed in Mortgage fees.
Sources
- Act No. 257/2016 Coll., on consumer credit, § 133 (costs included in the APRC), § 134 (calculation assumptions), Annex 1 (formula)
- Consumer Credit Act, Part Nine – annual percentage rate of charge (wording from 1 Sept 2024)
- ČNB – consumer protection in the financial market