Mortgage Education Center
Learn about mortgage concepts and how different factors affect your loan.
Impact
The repayment model significantly affects your monthly cash flow, total interest paid, and how quickly you build equity in your home.
Example
Equal installments keep your payment the same throughout the loan, while decreasing installments start higher but decrease over time, potentially better matching income that increases with inflation.
Related Terms
Impact
Overpayments reduce the principal faster, saving interest and potentially shortening the loan term significantly. Even small regular overpayments can have a dramatic effect over time.
Example
Paying an extra 200 per month on a 30-year 300,000 mortgage at 4% could shorten the term by 8 years and save over 60,000 in interest.
Related Terms
Impact
Even small changes in interest rates can significantly affect total interest paid over the life of a loan and your monthly payment amount.
Example
A 1% reduction in interest rate on a 300,000 30-year mortgage could save over 60,000 in total interest and reduce monthly payments by approximately 170.
Related Terms
Impact
Additional costs can significantly increase the effective cost of borrowing and should be considered when comparing loan options or calculating the true cost of homeownership.
Example
On a 300,000 mortgage, additional costs might include a 3,000 origination fee, 1,500 annual property insurance, 3,600 annual property taxes, and potentially 1,800 annual PMI.
Related Terms
Impact
Understanding your amortization schedule helps you see how much of your payment goes to interest versus principal at different points in the loan, and how additional payments would affect the loan.
Example
An amortization schedule would show that in the first payment of a 30-year 300,000 mortgage at 4%, about 1,000 goes to interest and only 432 to principal, while in year 25, about 300 goes to interest and 1,132 to principal.
Related Terms
Impact
Comparing different loan terms, interest rates, and repayment strategies can help you save tens of thousands over the life of your mortgage.
Example
Comparing a 30-year mortgage at 4% with a 15-year at 3.5% shows the 15-year option saves over 150,000 in interest but requires about 700 more in monthly payments.
Related Terms
All figures are shown in your own currency.
Baseline: Based on a 300,000 loan at 6% over 30 years
A 15-year term adds only 732.92 a month over the 30-year payment, yet erases 191,832.13 of interest. A shorter term is mostly cheaper, not mostly painful.
191,832.13 less interest
Baseline: Based on a 300,000 loan at 6% over 30 years
At 7% the loan costs 418,526.25 in interest versus 347,514.88 at 6%. The rate you shop for moves more money than almost anything else.
71,011.37 more interest
Baseline: Based on a 300,000 loan at 6% over 30 years
Adding 200 a month - about 11% on top of the payment - lifts your monthly outlay to 1,998.65 but erases 10 years 10 months and saves 140,782.22 in interest, far more than the extra you actually pay, because you kill principal before it compounds.
140,782.22 less interest
Baseline: Based on a 300,000 loan at 6% over 30 years
A 150 insurance line quietly adds 54,000.00 over the loan and lifts the true cost to 6.76% APR. Cancelling once you reach 20% equity saves about 33,000.00.
Baseline: Based on a 300,000 loan at 6% over 30 years
A 1% origination fee leaves the headline rate at 6% but pushes the true cost to 6.09% APR. The advertised rate is never the whole story - compare offers on APR.