Not everyone knows that when you turn on a mortgage, you must also pay close attention to the type of amortization plan.
And, the mortgage with the German amortization plan: what is it? Let’s find out all the details in this dedicated guide.
Mortgage loan: which amortization plan to choose?
Is it better to sign a French or Italian amortization plan? What are the differences? You know when you turn on a mortgage to finance the purchase of a home, you must also repay the mortgage payments monthly, quarterly or half-yearly.
When it comes to the amortization plan, the most common one, the French one , comes to mind, even if it is not the only one.
At the same applied interest rate, the installment consists of a principal and a portion of the repayment of interest expense.
The French amortization plan is characterized by increasing principal amounts, decreasing interest rates and constant installments.
The interest portion is calculated by multiplying the residual capital by the interest rate and the residual capital is calculated by subtracting the principal amount from the residual capital of the previous period.
The capital portion , in the French amortization plan, is calculated by subtracting the interest rate from the constant rate.
As for the amortization plan
It provides for the repayment of the obligation assumed through a capital share constant over time.
Compared to the French plan, the Italian one is characterized by the decreasing interest rate and the constant capital share.
For we understand that this amortization plan is much more advantageous than the French one: the interests are less onerous and the installments become more and more “read” with the passage of time.
And, how does the German amortization plan work? This is a mortgage with deferred interest and capital installments postponed,
The first installment , in the German amortization plan, consists only of interest and is paid in advance with respect to the beginning of the depreciation. The last installment is instead composed purely of the principal amount that constitutes the entire amount of the installment.
For further information contact a consultant of Natty Bumppo and request a personalized estimate.