Mortgage Calculator

• How to use mortgage calculator?
• What is a mortgage?
• Loan payment options - which is more profitable?

How to use mortgage calculator?

Calculate your mortgage using our calculator. First, select the “Loan payment type” - annuity or differentiated (you can read more about them below), then fill in the fields: loan amount (the amount you want to borrow), loan term (loan repayment period), interest (annual percentage rate), down payment (you can choose in percentage or currency) and click the “Calculate” button, you will see the result on the right side of our calculator. Also, by clicking the view report button, you will see the amortization table for your loan.

What is a mortgage?

A mortgage is a pledge of real estate. That is, a mortgage means that you take money from the bank at interest (loan), and the guarantee that you will return this money becomes a pledge of your real estate: houses, apartments, and land. A mortgage is usually perceived as a loan for the purchase of a home. In this case, the mortgage is an apartment (house) purchased with money received from the bank. But this is only one, albeit the most common, type of mortgage. You can also mortgage real estate that you already own and borrow money from the bank for a new apartment or house. Moreover, you can take a mortgage loan not only for the purchase of housing but also for its repair, construction, and other purposes without their indication.

Loan payment options - which is more profitable?

When choosing a loan program, borrowers are primarily guided by the interest rate. But not only the rate affects the final amount of the overpayment, but also the debt repayment scheme. There are two such schemes: annuity and differentiated.

Annuity payment

An annuity is a monthly payment scheme in which the amount (body) of the loan remains unchanged throughout the entire debt repayment period, but its structure changes.

In the first months, the main part is the interest, which is convenient for both the bank and certain categories of customers. This is how a financial institution insures itself against a shortfall in profits in case of early repayment. At the same time, borrowers with a stable fixed income are more comfortable dealing with a fixed amount. This type of payment eliminates the need to check the schedule every month and reserve money, and equal installments of the payment help to calculate and practically eliminate the risk of being left without funds after the next installment.

Annuity payment formula:MP = P\dfrac{i(1+i)^n}{(1+i)^n-1}

• MP - monthly payment
• P - loan amount
• i - monthly interest rate
• n - number of payments

Where:
The number of payments is equal loan term in months. n = y*12

• y - loan term in years

The monthly interest rate is equal to the yearly interest rate divided by 12 months. i = \dfrac{yi}{12}

Differentiated payment

A differentiated payment is a variant of the monthly loan payment when the amount of the monthly loan repayment is gradually reduced towards the end of the loan period. The maximum financial burden falls on the first months after the mortgage is issued, and towards the end of the loan period, the contributions become minimal.

The difference in the payments is because with a differentiated scheme, the so-called body of the loan (its amount excluding interest) is distributed for the entire period in equal shares, and interest on the balance is charged on top of the fixed amount.

Since the principal debt is reduced by the end of the loan term, less interest is charged - hence the change in the amount of the monthly payment. For comparison, with an annuity, the size of the minimum contributions are always fixed, but the ratio of interest and principal debt changes. In the first months, the lion's share of the payment goes to repay interest, while the principal debt of the borrower almost does not decrease. Only after the bank has received most of the due interest, the repayment of the principal debt begins. Thus, the final overpayment on the loan is significantly higher.

Differentiated payment formula:MP = PV+Mi

• MP - monthly payment
• PV - Principal payment
• Mi - Interest payment

Where:
The principal payment is equal to the loan balance divided by the total number of payments. PV = \dfrac{P}{n}

• P - loan balance
• n - number of remaining payments

The accrued interest payment (“Mi”) is calculated based on the balance of the debt for the current period and the interest rate. Mi = i(P-PV*n)

• i - monthly loan interest
• PV - Principal payment
• n - number of remaining payments
• P -loan balance

Which payment system suits who?

Deciding which is better - an annuity payment or a differentiated type scheme is largely determined by the goals of the loan and the financial situation of the borrower. If the task is to get a larger amount, and overpayments on the loan do not play a significant role, then you should pay attention to the annuity. This scheme is most suitable for citizens with a permanent fixed income.

For potential borrowers whose income is not fixed, a differentiated payment will become more attractive, especially if you take advantage of the possibility of early repayment. According to it, as a result, the overpayment is less than under the annuity scheme, however, the available loan amount will be approximately twice as modest. Accordingly, what is more, profitable depends on the specific tasks and other factors.