How is the monthly instalment on a property loan calculated?
Before you make a financing decision, three figures should be clear: how high is the monthly instalment? How long will I be paying? And what does the loan cost me in total? With the calculator below all three questions can be answered in seconds — on the basis of the loan amount, the nominal interest rate and the initial repayment rate.
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Interest rate vs. repayment rate – what makes the difference?
Many buyers focus on the interest rate — yet the repayment rate is at least as decisive for the total cost of the financing.
| Scenario | Loan | Interest | Repayment | Monthly instalment | Term | Total interest burden |
|---|---|---|---|---|---|---|
| Low repayment | 240,000 € | 3.5 % | 1 % | 900 € | approx. 48 yrs | approx. 277,000 € |
| Medium repayment | 240,000 € | 3.5 % | 2 % | 1,100 € | approx. 29 yrs | approx. 140,000 € |
| High repayment | 240,000 € | 3.5 % | 3 % | 1,300 € | approx. 22 yrs | approx. 103,000 € |
The difference between 1 percent and 3 percent initial repayment: you pay 200 € more a month — but in return around 174,000 € less in interest over the entire term. The higher repayment therefore pays off in almost every case, provided your liquidity allows it.
How long will I be paying?
The term of an annuity loan can be calculated precisely — and often comes as a surprise. At just 1 percent initial repayment and 3.5 percent interest, full repayment takes almost 50 years. That is not a financing error but mathematics: in the early years the bulk of the instalment goes into interest, and only a small part repays the loan. Only once the remaining debt has fallen noticeably does the repayment share begin to dominate.
Rule of thumb for the term: interest + initial repayment = the annuity rate in percent. At 5.5 percent (3.5 percent interest + 2 percent repayment), the term is roughly 100 divided by the annuity rate in years — so about 18 years. This approximation works well for medium interest and repayment rates.
When is a higher repayment worthwhile?
Almost always — when liquidity allows it. Three arguments:
- Reducing the interest burden: every euro repaid earlier pays no more interest in the future. At 3.5 percent interest, every additionally repaid euro saves around 1 € of interest over 20 years.
- Reducing interest-rate-change risk: the higher the initial repayment, the less remaining debt is left when the fixed-interest period expires. With sharply risen rates, a high remaining debt can become a burden.
- The psychological component: anyone with a foreseeable term (e.g. debt-free at retirement) can carry the financing more calmly than someone with an open 40-year term.
For investors there is an additional aspect: a lower repayment preserves more liquidity for further investments. Whether that makes sense depends on whether the expected return on further investments is above the financing interest rate — the marginal view of this is shown by the return-on-equity calculator.
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