In the previous issue, we learned the meaning of the term “underwriting" Today we invite you to continue the topic related to lending and move from waiting to a more active phase. After the underwriting procedure, that is, a complete check of reliability and solvency, has been completed, and you receive the long-awaited loan for buying an apartment in the center beloved capital, all that remains is to sign the agreement, move and methodically give money until the purchased property becomes entirely yours. It is at this stage that the time comes to get acquainted with the annuity payment.
❝Annuity payment is a method of repaying a mortgage or loan in which you pay equal amounts at equal time intervals.❞
Let's delve deeper into the topic to understand the essence of the term. With standard payments on a loan or mortgage, the entire payment consists of the body of the loan, that is, the amount of the debt itself, and interest. The peculiarity of the annuity payment is that in each subsequent payment the ratio of principal and interest changes - the share of the principal debt increases, while the share of interest decreases. At the same time, the total amount remains unchanged - each time at a clearly established time you pay the same amount. Thanks to such a system, it is much easier for the borrower to plan his budget, since throughout the entire loan period he will have to pay a fixed and constant amount of money.
Greater stability and predictability of the annuity payment also has its negative side. Due to the nature of the distribution of debt and interest on the loan, it is not uncommon for the total amount to be slightly higher than if you had chosen a more conventional loan repayment system.
Example of use:
— My wife and I have been wanting for a long time To buy a house on credit, but we still can’t decide on the payment method.
— I would recommend an annuity payment. This way you will know exactly how much and when to pay.
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