When repaying a loan, should you repay the principal first or the interest first?

Of course, the principal is repaid first, and the interest is paid last. However, bank loans generally repay the principal and interest at the same time, but the proportional structure of principal and interest is different:) Equal principal and interest repayment method . The advantage is that the borrower can accurately grasp the monthly repayment amount and arrange the family's income and expenditure in a planned way. It is more convenient and easy to remember. The disadvantage is that the total interest expense is relatively high, which is suitable for customers with stable income, little change in expected income, and buying a house for self-occupation; (2) Waiting for principal repayment method and declining repayment method. The advantage is that the interest expense is relatively small, but the disadvantage is that the monthly repayment amount gradually decreases, and the early repayment pressure is high. It is suitable for customers who currently have a high income or whose monthly repayments account for a small proportion of the family's monthly income based on the equal repayment method, but whose expected income is uncertain. When using the decreasing method, due to the large amount of previous repayments, , and the principal must be larger, so the interest paid in the first few months is not more than the equal principal and interest repayment method. There is no need to pay interest on the early repayment part. If the principal and interest of a mortgage are equal, is the interest paid first?

Mortgage loans that adopt the equal principal and interest repayment method do not repay the interest first and then the principal. Instead, the monthly repayment amount remains the same during the entire repayment period, of which the principal amount remains unchanged. The proportion of principal and interest will continue to change. In the early stage of repayment, the proportion of interest is larger. As the customer continues to repay, the proportion of principal increases month by month, and the proportion of interest decreases month by month.

In other words, for a mortgage with equal principal and interest, both the interest and the principal must be repaid every month. It is just that more interest is repaid in the early stage. In the later period, the interest is almost repaid, and only the principal is repaid. A little more.

Of course, everyone needs to note that interest may be calculated based on the actual number of days in the first month, so the monthly repayment amount may be different from subsequent ones. In short, customers only need to make repayments according to the monthly payment amount provided by the bank. As long as there are sufficient funds in the bound repayment bank card, on the monthly repayment date, the bank system will automatically deduct the corresponding amount for repayment (if you apply for provident fund offset loan business, the balance will be deducted from the provident fund account) ). Should mortgage repayment involve principal or interest first?

Mortgage loan repayment involves both principal and interest, and there is no question of which one should be repaid first. However, in the mortgage repayment method, the interest of equal installments of principal is less than that of equal installments of principal and interest, because equal installments of principal and interest mean that the repayment amount in each period is equal, including a portion of the principal and the interest payable in the current period. The equal principal amount is to divide the loan principal into equal parts during the repayment period, and repay the same amount of principal and the interest generated by the remaining loan in that month every month. The monthly principal payment gradually decreases, and so does the interest. Although the monthly repayment amount may be lower than the equal principal repayment method at the beginning, the interest paid in the end will be higher than the equal principal repayment method.

What are the consequences of overdue mortgage repayments

1. There is a stain on your credit report

If it is just an occasional overdue payment, then as long as you have a good attitude and are timely If you explain it to the bank and pay it off, there may be no taint on your credit report. However, if there are multiple overdue payments, the bank will definitely have records, which will affect your personal credit. In addition, it is very difficult to remove these stains on your credit report. Even if you want to get a loan to buy a house in the future, you will be rejected by the bank.

2. Being fined by the bank or even required to repay in advance

Generally speaking, when there are three overdue payments in a row or cumulatively, the bank may come to call for payment, and there may be Some banks will ask for penalty interest. And when you are overdue for more than six times consecutively or cumulatively, some banks will even require the lender to repay the full amount in advance. Because in this case, the lender's credit is no longer trusted by the bank, so the bank has the right to require early repayment.

3. If the payment is overdue multiple times, the bank will take back the house through legal means

Occasional overdue payments may be due to fund transfer or forgetting, but if repayments are overdue multiple times consecutively, then the bank will The lender's repayment ability will be re-evaluated. Once it is determined that the borrower is unable to repay the loan, the bank will use legal means to take back the borrower's house for auction to make up for the loan amount.

The above is the relevant content shared by the editor about whether to repay the principal or the interest first when repaying a mortgage. For more information, you can pay attention to the construction industry to share more useful information. Is the interest or the principal to be repaid first? Generally, banks repay the principal and interest together. The repayment methods are divided into equal amounts of principal and interest and equal amounts of principal. The proportion of principal of these two repayment methods is different, no matter which one In terms of repayment, banks charge interest based on the remaining principal.

What are the mortgage repayment methods?

1. Equal principal and interest

Features: The monthly repayment amount is the same, which is essentially the principal and interest payment. The proportion of money is increasing month by month, and the proportion of interest is decreasing month by month. For the same loan term and loan amount, the total interest for equal amounts of principal and interest is much higher than the total interest for equal amounts of principal. People who are suitable for equal amounts of principal and interest: The monthly repayment amount of equal amounts of principal and interest is the same, so it is more suitable for families with normal spending plans, especially young people. As age increases or positions are promoted, income will increase and living standards will naturally rise. ; If such people choose the principal method, the early pressure will be very high.

2. Equal principal amount

Features: The monthly repayment amount is different and decreases month by month; it equalizes the loan principal according to the total number of months of repayment. points, plus the interest on the remaining principal from the previous period, this forms the monthly repayment amount. Therefore, the monthly repayment amount of the equal principal method is larger, and then decreases month by month, and the more the repayment is, the less it is. People who are suitable for equal-amount principal: The equal-amount principal method has a larger repayment amount in the early stage and then decreases month by month, so it is more suitable for borrowers who have strong repayment ability in the early period. Of course, some older people are also more suitable. This is appropriate because income may decrease as you age or retire.

Precautions for early repayment of mortgage loans

1. The time allowed by banks for early repayment is different. The time allowed by banks for early repayment is different. Most banks require at least one year of repayment. You can apply for early repayment of your loan only after that, but some banks say you can apply for early repayment of your loan at any time. Among the state-owned banks, Bank of China and China Construction Bank need to repay the loan for one year before they can apply for early repayment, and ICBC needs half a year to repay the loan in advance.

2. Banks have different interest adjustment cycles. Banks have different interest adjustment cycles. Generally, the mortgage period is more than 10 years. During this cycle, it is inevitable for the central bank to adjust interest rates, and each bank adjusts interest rates according to the adjustment period. The timing of interest is also inconsistent. Most Chinese banks such as ICBC, Agricultural Bank of China, and China Construction Bank generally adjust their new repayment interest rates based on the latest central bank benchmark interest rate on January 1 of each year.

3. Don’t forget to cancel the mortgage registration after repaying the mortgage. Don’t forget to cancel the mortgage registration after repaying the mortgage early. Whether the loan is repaid within the contract period or repaid in advance, citizens will still have to pay back the mortgage. After the loan is completed, don’t forget to register for cancellation of mortgage.

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