• Wed. Oct 4th, 2023
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    Did you know that there are two ways to pay off your mortgage?

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    4 minutes, 30 seconds Read

    The total repayment amount varies depending on the repayment method selected. Here are some tips for choosing a repayment method that fits your life plan.

    Repayment method is “equal principal and interest repayment” or “equal principal repayment”

    Equal repayment of principal and interest

    A repayment method that provides a fixed monthly repayment amount.

    merit Since the repayment amount is fixed, it is easy to make a repayment plan, and at the beginning of repayment, the monthly repayment amount is lower compared to “equal principal repayment”.
    Demerit Since the “principal” does not decrease at the beginning of repayment, “interest” on “principal” is also large, and the total repayment amount is higher than “equal principal repayment”.

    Equal repayment of principal

    It is a repayment method that repays the “principal” in a fixed amount.

    merit Since the repayment of the “principal” is constant, the “interest” on it will also decrease, and the total repayment amount will be lower than the equal repayment of principal and interest.
    Demerit At the beginning of repayment, the monthly repayment amount will be higher compared to the “equal principal and interest repayment”.

    That’s right. The total repayment amount varies depending on the repayment method selected. Here are some tips for choosing a repayment method that fits your life plan:

    • Equal principal and interest repayment: This method is a good option if you want to have lower monthly payments in the early years of your loan. However, you will pay more interest over the life of the loan.
    • Equal principal repayment: This method is a good option if you want to pay off your loan as quickly as possible. You will pay less interest over the life of the loan, but your monthly payments will be higher in the early years.

    The best repayment method for you will depend on your individual circumstances and financial goals. If you are not sure which method is right for you, talk to your lender. They can help you compare different repayment methods and choose the one that is best for you.

    Here are some additional factors to consider when choosing a PHH Mortgage  repayment method:

    • Your budget: How much can you afford to pay each month?
    • Your goal: Do you want to pay off your loan as quickly as possible?
    • Your interest rate: The interest rate on your loan will also affect the best repayment method for you.
    • Your flexibility: How flexible are you with your payments?

    Once you have considered these factors, you can start to compare different repayment methods. There are many resources available to help you do this, such as your lender’s website, government websites, and financial websites.

    I hope this helps! Let me know if you have any other questions.

    What is the difference between equal principal and interest repayment and equal principal repayment?

    • Equal principal and interest repayment: This method is a repayment method in which the monthly payment amount is constant. This means that the amount of principal and interest paid each month will be the same. The interest portion of the payment will decrease over time, while the principal portion of the payment will increase. This method is often referred to as an “amortized” loan, because the loan is gradually paid off over time.
    • Equal principal repayment: This method is a repayment method in which the amount of principal repaid each month is constant. This means that the amount of interest paid each month will decrease over time, while the amount of principal paid each month will increase. The total monthly payment amount will increase over time, as the amount of principal repaid each month increases. This method is often referred to as a “bullet” loan, because the entire principal balance is repaid at the end of the loan term.

    Which repayment method is better?

    The best repayment method for you will depend on your individual circumstances and financial goals. If you want to have lower monthly payments in the early years of your loan, equal principal and interest repayment may be a good option for you. However, you will pay more interest over the life of the loan. If you want to pay off your loan as quickly as possible, equal principal repayment may be a better option for you. You will pay less interest over the life of the loan, but your monthly payments will be higher in the early years.

    What are the pros and cons of each method?

    Here is a table that summarizes the pros and cons of equal principal and interest repayment and equal principal repayment:

    Method Pros Cons
    Equal principal and interest repayment * Lower monthly payments in the early years * Easy to make a repayment plan * Pay more interest over the life of the loan
    Equal principal repayment * Pay less interest over the life of the loan * Monthly payments increase over time * Higher monthly payments in the early years

    How do I choose the right repayment method for me?

    The best way to choose the right repayment method for you is to consider your individual circumstances and financial goals. You should also consider the interest rate on your loan and your flexibility with your payments. If you are not sure which method is right for you, talk to your lender. They can help you compare different repayment methods and choose the one that is best for you.

    I hope this helps! Let me know if you have any other questions.

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