Getting a mortgage is a long-term solution, as the recipient will have to pay back over several years, and possibly decades. At the same time, it is important to understand how differentiated and annuity payments differ in order to choose the most suitable one.
A mortgage loan is an amount of money issued by a bank for a specific purpose - to purchase a home. At the same time, there are two main ways to repay a mortgage loan - annuity and differentiated payments.
Differentiated payment
The differentiated payment has this name because the amount of monthly payments that will have to be transferred to the bank's address to the payer, in this case, will differ during the period of the mortgage loan repayment. The fact is that each mortgage payment consists of two main components: the first of them is the amount that goes to pay off the principal debt, and the second is the amount that the borrower pays as interest for using the bank's funds. The combination of these two amounts represents the amount of the monthly mortgage payment.
In the case of a differentiated payment, the amount of the monthly payment directed to repay the principal debt is calculated simply by dividing the amount of the debt by the number of months during which it will be repaid. For example, a borrower receives a mortgage loan from a bank in the amount of 1.2 million rubles for a period of 10 years. In this case, the monthly amount of the payment directed to repay the principal debt will be 10 thousand rubles.
The second part of the differentiated payment is the amount paid to the bank as interest. It, in turn, depends on two main parameters - the interest rate on the mortgage loan and the remaining amount of the debt. Suppose the mortgage rate is 12% per annum. Thus, in the considered example with a debt of 1.2 million rubles, the amount to be paid as interest in the first month will be 12 thousand rubles. Thus, the total amount of the mortgage payment in the first month will be equal to 22 thousand rubles.
However, in the future, as the borrower repays the debt, the amount of interest for using the money will decrease. For example, when the amount of the unpaid debt reaches 500 thousand, the amount allocated for the payment of interest will already be 5 thousand rubles, and the total amount of the mortgage payment will be 15 thousand rubles.
Annuity payment
An annuity payment, as opposed to a differentiated one, involves a monthly payment to the bank of the same amount of funds throughout the entire period of repayment of the mortgage loan. This is achieved by a different ratio of the amounts allocated to repay interest and principal, in different periods of payment.
So, if in the first months the share of the payment directed to repay the principal debt may be small, from closer to the end of the term of the mortgage loan, the lion's share of the payment will be directed to repayment of the principal debt, and only a small part of it will be used to pay interest. At the same time, experts argue that, in total, the payment of mortgage debt through annuity payments is more expensive for the borrower than when using a differentiated repayment mechanism.
