What difference does it make, according to which scheme to pay, if you still have to say goodbye to money? We wouldn't say so. Differentiated and annuity payments differ not only in their mechanics, but also in the final amount. Despite this, both of them have their advantages, so we recommend that you understand the pitfalls before plunging headlong into one or another loan.
❝Differentiated payment is a method of repaying a mortgage or loan, for which the amount of payments decreases with each subsequent payment. ❞
Why does this happen? Each payment consists of the body of the debt and interest. The body is divided into equal parts, so when gradually repaying the debt, you reduce its size, on which interest is accrued. Thus, together with the change of the body, the percentage of debt also changes, due to which each next payment becomes smaller and requires a careful calculation.
So that you better understand the mechanics and do not get confused in your own debts, we offer a simple scheme for their calculation:
Fixed part covering the body of the debt + variable part covering the interest = Differentiated payment
The fixed part is very easy to find out - you should divide the entire amount by the number of months, that is, by the number of payments.
The part responsible for the percentage is calculated according to a more complex scheme:
(Debt balance × Annual interest rate × Number of days in the settlement period) / Number of days in the year
As you can see, to determine how much to pay next time, you will have to fiddle with the calculator a lot. The first fixed payment will be quite large, so not every investor can afford such a payment scheme. Also if in the case of annuity payment you need to pay a fixed amount every month and not worry about the fact that you might have made a mistake in the calculations, then with a differentiated payment you will not have such confidence... But it also has its clear advantages, namely savings. Due to the fact that the body of the debt decreases each time, you will have to pay a smaller percentage, so you will not overpay. Of course, this is not very profitable for the bank, so such payment schemes are becoming less and less common.
Example of use:
— How much will you have to pay for the loan this month?
— I need to calculate the amount of the differentiated payment, so you can't say it that easily. I only now began to understand that mathematics really should be taught at school.
Are you planning to buy an apartment in installments or do you want to immediately become its full owner? No matter what your request is, the experts of THE Capital agency will help with its solution.
