When we are going to apply for a mortgage there are a series of concepts and financial terms that we are going to find that we may not be used to. However, it is important that we understand the meaning of some of them and know how to interpret them throughout the life of the loan. This is the case of the mortgage amortization table. This document provides us with very valuable information to understand the trajectory of our debt.
Its interpretation can be complex, so in this article we want to clarify all doubts.
What elements are we going to find in a mortgage amortization table?
The amortization table shows us the amount of financing broken down differentiating between principal and interest. It also specifies the term and scheduling of payments.
The elements that we find in a table are the following:
- Date of payments
- Capital that is amortized and the one that remains to be amortized
- Interest included in each installment
- Monthly fee
3 Amortization methods for your mortgage loan
1- French depreciation method
It is the most well-known and used form of amortization in our country.
It is a progressive method in which the installments of the first years contain a higher amount of interest. These will decrease as the years go by. In the event that you can make some early repayment, it will be more interesting that you do it at the beginning to amortize more capital and reduce the weight of interest.
Its most attractive advantage is that the installment will remain constant throughout the life of the mortgage.
2- German depreciation method
With this method throughout the life of the loan the fee is divided between principal and interest in equal parts. This means that for example when we reach the middle of the life of the loan we will have paid half of the interest and also the capital, that is, we will have paid half of the house and we will lack the other 50%.
In the case of the French method, during the first half of the life of the loan what we will have amortized will be to a greater extent interest.
Its main advantage is that towards the end of the loan the installments you will bear will be lower and will assume the real value of the house.
3- American depreciation method
This system is perhaps the least known and used. Its operation is based on the fact that throughout the life of the loan what you pay is full interest and in the last installment you will have to make a single payment of the capital that the bank has lent you.
The main advantage is that during the term of the loan the payments are comfortable since you only face interest, it would be like a mortgage with permanent lack until it reaches its end.
In the last term you will have to make effective the payment of the borrowed capital plus the interest that is outstanding.
The American method is not the most common for the amortization of mortgage loans but for the repayment of bonds.
The interpretation of a mortgage amortization table as well as the rest of the financial terms that come to light in banking negotiation can be complex.
If you are going to make a decision as responsible as it is to mortgage, no doubt should remain in the pipeline. Mortgage negotiation is an art we know very well. We get your personalized mortgage at the best price.
If you are determined to apply for your mortgage it will be a pleasure to help you. We study your case without prior cost or commitment.