Mortgage repayment methods and characteristics
1, equal repayment of principal and interest
Matching principal and interest repayment method, also known as regular interest payment method, means that the borrower repays the loan principal and interest in equal amount every month, calculates the monthly loan interest according to the remaining loan principal at the beginning of the month, and settles it every month. Add up the total principal and interest of the mortgage loan and distribute it evenly to each month of the repayment period. As a repayment, he pays a fixed amount to the bank every month, but the proportion of principal in the monthly repayment increases month by month, and the proportion of interest decreases month by month.
With this repayment method, the funds to be repaid every month are the same. Therefore, everyone's repayment operation is relatively simple, and it is convenient to arrange income and expenditure by bearing the same amount every month.
This method is more suitable for families with stable income. If you buy a house and live for yourself, you can also choose this method if the economic conditions do not allow you to invest too much in the early stage. However, it also has some defects, because the interest will not decrease with the repayment of the principal amount, and the bank funds take up a long time, and the total interest of repayment is higher than the average principal repayment method to be introduced below.
Advantages: Pay the same amount every month. As a lender, the operation is relatively simple. Bear the same amount every month, which is also convenient for arranging income and expenditure.
Disadvantages: Because the interest will not decrease with the repayment of the principal amount, the bank takes up a long time of funds, and the total interest of repayment is higher than the average principal repayment method to be introduced below.
2. Repayment by average capital
Average capital repayment method, also known as repayment method with interest and principal and average capital with unequal interest. The lender will allocate the principal to each month and pay off the interest from the previous trading day to the repayment date. Compared with the matching principal and interest, the total interest cost of this repayment method is lower, but the principal and interest paid in the early stage are more, and the repayment burden is reduced month by month.
For equal principal repayment, the amount of money to be repaid in the first month is the most, and it will gradually decrease in the future, so the repayment pressure in the early stage of the loan is relatively high.
This method is very suitable for people with high income at present, but it is predicted that their income will decrease in the future. In fact, many people over middle age, after a period of efforts, have a certain economic foundation. Considering that your income may decrease with retirement and other factors, you can choose this way to repay.