The amortization plan for a mortgage loan

The mortgage is depreciated like all other forms of credit. The bank generally gives the borrower the choice of the most appropriate repayment formula for his situation.

The question of what type of depreciation depends on a good understanding of what is meant by depreciation and what is meant by it.

Definition

The amortization of a mortgage is the repayment of the principal borrowed. To avoid confusion, it should be noted that a credit is made up of two different realities. On the one hand, there is the amount requested by the borrower and which is the object of the loan, that is the capital, and the other the interest received by the bank in return for its services..

There are situations where the amortization of the mortgage loan makes it possible to benefit from a tax deduction. It is advisable to inquire about the conditions required.

What is a depreciation plan?

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When you enter into a mortgage loan agreement, for example here, the financial institution and the borrower agree on a repayment plan that lists elements such as monthly payments and the repayment term. A repayment table is then drawn up together.

This is a depreciation plan, the purpose of which is to indicate exactly how the credit will be repaid and the amount of each monthly payment.

What are the different types?

There are 3 types of possible amortization of the mortgage loan:

  • The first is to make a regular refund of constant monthly payments. During the first period, the share of interest in this amount will be greater compared to that of capital. At the end of the contract, it will be the opposite effect since there will be more capital than interest in each payment.
  • The home loan can also be amortized so as to repay all interest throughout the term. It will only be at the end of the loan that the borrower will repay in its entirety the capital and interest corresponding to the last monthly payment.
  • Another alternative is to repay in each month a fixed amount of capital. The share of capital to be included in the payment will be calculated by simply dividing the capital to the number of months relating to depreciation. Interest will be repaid gradually as the contract matures.

Which solution must be chosen? This is not an easy question and the final choice usually depends on how long and how much to borrow. It is always better to contact a specialist to get the right answer to your situation.