For property buyers, the difference between the two methods will produce very different results. Matching principal repayment can quickly reduce the repayment pressure and reduce the money that buyers spend on interest, but prepayment is very painful, and more people choose matching principal and interest.
If you buy a house with a loan of100000, and then plan to pay it off in 20 years, what is the difference between the two repayment methods? Let's look at a picture first:
The red part of this picture is repayment interest, and the blue part is repayment principal. In the repayment method of equal principal and interest, with the gradual reduction of the remaining principal of the loan, the proportion of interest is also gradually reduced. Matching principal repayment method, the principal paid every month remains unchanged, but the interest gradually decreases, and the amount paid every month is getting less and less.
In the previous eight years, the average capital payment was more. Therefore, although the interest on average capital will be less, in the first eight years, the repayment pressure on average capital was greater, and it did not feel the benefits of less interest. From this perspective, matching principal and interest repayment is actually to exchange more interest for less repayment pressure. At the same time, for buyers with less down payment, the repayment mode of equal principal and interest can also support a larger amount of loans.
Where should the average capital be used? For investment buyers and buyers with a high down payment ratio, the average capital is actually more cost-effective. On the one hand, investment buyers hope to repay the loan quickly and avoid the dependence of the house on cash flow. Then in the case of short loan time, it is best to repay quickly and choose the average capital. On the one hand, it can save some interest, on the other hand, it can quickly reduce the remaining principal, repay the remaining loan quickly when necessary, and then refinance with the house.
Equal principal and interest method
One of the most important characteristics of the equal principal and interest method is that the monthly repayment amount is the same. In essence, the proportion of principal increases month by month, the proportion of interest decreases month by month, and the number of monthly repayments remains unchanged. That is to say, in the "principal and interest" distribution ratio of monthly payment, the proportion of interest repaid in the first half is large, and the proportion of principal is small. After the repayment period is over half, it gradually turns into a small proportion of principal and interest. The calculation formula is as follows:
Monthly repayment amount = [principal x monthly interest rate x( 1+ monthly interest rate) loan months ]/[( 1+ monthly interest rate) repayment months-1]
Monthly interest = residual principal x monthly loan interest rate
Total repayment interest = loan amount * loan months * monthly interest rate *( 1+ monthly interest rate) loan months /( 1+ monthly interest rate) repayment months-1- loan amount.
Total repayment amount = repayment months * loan amount * monthly interest rate *( 1+ monthly interest rate) loan months /( 1+ monthly interest rate) repayment months-1.
Note: In the method of matching principal and interest, banks generally charge interest on the remaining principal first and then on the principal, so the proportion of interest in monthly contributions will decrease with the decrease of principal, and the proportion of principal in monthly contributions will increase, but the total monthly contributions will remain unchanged.
Average capital method
The biggest feature of the average capital method is that the monthly repayment amount is different, showing a state of decreasing month by month; It is to evenly distribute the loan principal according to the total number of repayment months, plus the interest of the remaining principal in the previous period, thus forming the monthly repayment amount, so the repayment amount of the average capital method is the largest in the first month, and then decreases month by month, and the less the more, the calculation formula is as follows:
Monthly principal and interest repayment amount = (principal/repayment months)+(principal-accumulated repaid principal) × monthly interest rate.
Monthly principal = total principal/repayment months
Monthly interest = (principal-accumulated principal repayment) × monthly interest rate
Total repayment interest = (repayment months+1)* loan amount * monthly interest rate /2.
Total repayment amount = (repayment months+1)* loan amount * monthly interest rate /2+ loan amount.
Note: In the average capital method, the amount of principal returned by a person every month is always the same, and the interest decreases with the decrease of the remaining principal, so the monthly repayment amount gradually decreases.
As can be seen from the above, under normal circumstances, the total interest paid by equal principal and interest is more than the average capital, and the longer the loan term, the greater the interest difference.
People with equal principal and interest
The monthly repayment amount of equal principal and interest is the same, so it is more suitable for families with normal consumption plans, especially young people. Moreover, with the promotion of age or position, income will increase and living standards will naturally rise; If this kind of person chooses the principal method, the early pressure will be very great.
Appropriate population in average capital
The average capital method is more suitable for lenders with strong repayment ability some time ago, because the repayment amount in the early stage is large, and then it decreases month by month. Of course, some older people are also more suitable for this way, because their income may decrease as they grow older or retire.
Example: Mr. Li bought a commercial house with an area of 1.20 square meters, and he borrowed 600,000 yuan from the bank. The repayment period is 20 years, and the annual interest rate is 6% (monthly interest rate is 5‰). Now we use the average capital method and the equal principal and interest method to analyze:
Matching principal and interest: monthly repayment amount = 600,000 * 5 ‰ * (1+5 ‰) 240/(1+5 ‰) * 240-1= 3012.5 yuan.
Average capital: the first month = (600,000/240)+(600,000-0) × 5 ‰ = 5,500.
Second month = (600000/240)+(600000-2500) × 5 ‰ = 5487.5.
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In essence, there is not much difference between the average capital method and the equal principal and interest method, and most of them are based on everyone's current situation and needs. Matching principal and interest is beneficial to memory, planning and repayment. In fact, most people prefer the "equal repayment method" because this method has a balanced repayment pressure and a fixed monthly repayment amount, which is not much different from the average capital method. And with the growth of time, the use value of funds will be different. Of course, there are also many relatively well-off people who want to make their future life easier and save costs, and will choose the average capital method. Simply put, which repayment method to choose depends on everyone's current situation and future planning. Don't blindly believe what others say.