Mortgage instalment
An instalment is the amount you have to pay the bank each month. Each payment comprises an element of principal, which is repaid gradually, and of interest.
What does the amount of the instalment depend on?
- The amount of capital borrowed
- The interest rate
- The mortgage term
- The mortgage repayment method
Instalments are usually calculated using a capital repayment method, also known as French amortisation. This means that monthly payments (of principal + interest) remain the same over the life of the loan, except for where the interest rate on variable-rate mortgages is adjusted.
Interest is calculated by multiplying the outstanding amount of capital at any given time by the interest rate applicable. Therefore, at the beginning of the life of the loan, more interest will be paid and less capital will be repaid.
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Rounding a mortgage interest rate
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Can my bank service other debts with the money deposited to pay my mortgage instalment?
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