Getting a mortgage is an important step that requires careful planning of your financial capabilities. Among other issues that need to be addressed when receiving it, you also need to make a choice between annuity or differentiated payments.
Differentiated payment
Differentiated payment is so called because as the mortgage is paid off, the amount that the borrower will have to pay to the bank every month will change. This is due to the fact that each such payment consists of two main parts: the amount of money, which is sent to repay the body of the loan, and interest paid for the use of the bank's funds.
In the case of a differentiated payment, the part of it that is directed to repay the loan itself is unchanged throughout the entire repayment period. Its size is quite simple to calculate and independently: for this you need to divide the total amount of the loan by the number of months during which it is planned to be paid. For example, if the borrower received a loan for 2.4 million rubles, which he plans to repay within 10 years, the amount of monthly payments will be 20 thousand rubles.
The second part of the payment is the interest that is due to the bank for providing them with loan funds. The exact size of this portion of the amount will depend on two factors. The first of them is the amount of the interest rate on the loan, and the second is the amount of the loan that remains to be paid. Since this amount will decrease over time, the amount of interest for using it will correspondingly decrease. For example, if the loan in the example described above was taken at 12% per annum, the amount of interest paid in the first month will be 24 thousand rubles. During this period, the total monthly payment for it will thus amount to 44 thousand rubles. And when the loan amount decreases, for example, to a million rubles, the interest rate will reach 10 thousand rubles, and the total payment will be 30 thousand rubles.
Annuity payment
An annuity payment is a more complex way of calculating, but easier for the borrower to perceive, a way of repaying a loan. In this type of payments, there are also two parts, respectively, directed to the repayment of the loan body and the payment of interest, however, their ratio and value in the process of making payments are constantly changing. At the same time, a characteristic feature of annuity payments is that the amount sent to the bank on a monthly basis remains unchanged throughout the entire period of repayment of the mortgage.
So, in the first months of the loan repayment, the borrower's payment will be mostly directed precisely to the payment of interest, and the remaining small part, which will depend on the loan rate, to repay his body. For example, in some cases, the ratio of these parts in the monthly payment may be 10/90, respectively.
However, over time, the share of the payment directed to the payment of interest will decrease, and the share transferred to repay the loan body will increase. As a result, by the end of the payment period, the ratio of the parts will change dramatically: now most of the payment will go to pay off the principal debt, and only a small part of it will go to pay interest. For example, in some cases, by the end of the mortgage repayment period, this ratio may reach 90/10, respectively.
