If you repay in advance, the interest will be less. You can also shorten the interest. In the case of average capital, the repayment amount was quite high in the first few months, and then gradually decreased.
The following is the case and the bank's explanation:
Jingchu Online News (Metropolis Daily) (Reporter Ding) "The newspaper said that the interest paid by the two repayment methods of mortgage is different, but the bank won't let me change the repayment method. Isn't this overcharged me? " Mr. Wang from Hankou recently called to ask.
Mr. Wang said that he borrowed money from the bank to buy a house, and the bank adopted the repayment method of "equal principal and interest". Later, I read in the newspaper that there is also an "average capital" repayment method with much less interest. He wanted to change it, but the bank refused.
Bankers said that the main reason is that there is only one kind of "equal principal and interest" in the unified computer software of the head office, so it is impossible to change the repayment method and there is no intention to let the public pay more interest.
According to bankers, these two repayment methods are based on the Central Bank's Measures for the Administration of Personal Housing Loans. The calculation principle is the same. Considering the time value of funds, although there is interest difference, the actual interest burden is basically the same.
According to reports, the reason why there is interest difference is because the bank funds occupied by the two methods are different. Matching principal and interest (currently adopted), the monthly repayment amount is fixed, because there are more interest in the early stage, less principal after deducting interest, and more bank funds are occupied, so the interest expenditure is higher. The latter way is to pay off all the interest generated in the current month, and then pay back a fixed amount of principal. The bank's principal decreases rapidly, so the interest is less.
Bankers said that for most people, matching principal and interest repayment is more convenient, because the monthly repayment amount is the same, the burden is balanced, and it is also convenient for banks to remember and supervise. However, the monthly repayment amount of the average capital repayment method is not fixed, and the public can't calculate and supervise it, so there is great pressure to repay in advance.