Mortgage – how to calculate the loan installment
The amount of the loan installment depends mainly on the amount of capital to be borrowed, the amount of interest, additional fees and the loan period. The exact way of calculating installments depends on whether they will be fixed or decreasing. The easiest way to recalculate is using a special online application.
What determines the amount of the loan installment?
Mortgage loans consist of two parts: capital and interest. The first one includes the borrowed capital, which is only the amount borrowed. The second is the so-called interest, i.e. the remuneration of the financial institution for borrowed capital. In the interest part, interest, margin and commission are taken into account. Often additional credit costs are added, such as insurance against low own contribution or life policy. All these fees affect the amount of the final loan installment. The loan period should also be taken into account – the longer it is, the lower the monthly commitment will be. However, it must be remembered that the total cost of the loan will then be higher.
Equal installments and decreasing installments: how are they counted?
In the case of mortgage loans, there are two types of installments:
- fixed installments, i.e. those in which the sum of the principal and interest is always the same. Initially, the main component of the installment is the interest part, and as the lending expires, the capital part increases;
- decreasing installments, i.e. those in which installments decrease over time. The capital part in decreasing installments is always the same, but the interest is cheaper, which is calculated from the lower and lower indebtedness.
Fixed installments are easier to calculate yourself, because their amount does not change throughout the loan period. In the case of decreasing installments, each subsequent payment must be calculated separately taking into account the lower amount of debt. The most convenient way is to use the repayment schedule prepared by the loan advisor.
Financial advisor – the easiest way to calculate a loan installment
The financial advisory offices are a great facilitation for the borrowers, where they can make a full cost calculation free of charge. These are applications that allow you to calculate the expected amount of equal and decreasing installments and find out what the approximate cost of the entire loan will be. Financial advisors also allow you to quickly compare offers in different banks and select the most advantageous one under the supervision of an expert.