Alternative Mortgage Repayment Plans: Equal Principal vs. Equal Amortization

Over 7 years ago

I believe that most of us are familiar with the Equal Loan Payment method, commonly known as Equal Amortization. However, have you ever wondered if there are alternative mortgage repayment plans avlable?

Would banks actually offer a system like Equal Principal Payment? Yes, they do!

Under this repayment method known as Equal Principal Payments:

The loan is repd through equal amounts dedicated to principal. While the installment payments themselves might be uneven, because interest payments start high in the first year and gradually decrease as more of the principal is pd off.

In contrast, with Equal Amortization:

Mortgage repayments are made in equal installments throughout the duration of the loan term. The amount applied towards principal payments starts small in the beginning but increases gradually over time until it hits its peak during the final year. Conversely, although interest payments start high and decrease each year.

In essence, the Equal Principal Payment system ensures that you pay higher amounts initially when interest rates are high but sees a reduction as more of your principal is pd down over time.

If you're considering these options or seeking advice from a banker about which repayment method might suit you best, please feel free to share your thoughts here. We'd love to hear your perspectives!

As an added note, many people who are looking for mortgage plans may be interested in knowing if there's any alternative other than Equal Loan Payments.

In this context, the Equal Principal Payment system has the advantage of paying off interest at a faster pace than traditional equal amortization. Therefore, although monthly payments start high and drop over time, the total amount pd over the loan's lifetime will typically be less due to reduced cumulative interest charges.

If you'd like us to provide more information on how banks might help with mortgage planning, please let us know.

Let inspire further discussions on smart financial decisions when it comes to mortgages. Do share your thoughts on choosing between Equal Amortization and Equal Principal Payment schemes!
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