Among of the many types of mortgage that a borrower can avail, the amortizable loan is the most common. This is the classic credit taken out with a lending institution at a fixed rate, for a period chosen in advance, in order to finance the acquisition of real estate – be it a principal residence or a rental investment . With the advantage of being able to be backed by an additional credit helped, such as a PTZ for example. Let’s see this in detail.
What is the amortizable loan?
The amortizable loan is none other than the mortgage classic used to finance the purchase of housing. It is divided between capital and interest, both making up what is called “monthly payments”, a sum fixed in advance that the borrower will have to pay each month for the duration of the loan. With, however, the possibility of modulating his reimbursements according to the evolution of his personal or professional situation.
We speak of an “amortizable loan” because the capital due is “amortized” as and when, until the loan matures and the total repayment of the amount. It can extend over a period of 5 to 25 years most often, but credit institutions increasingly accept to grant loans repayable over 30 years.
Depreciable credit can be backed by other types of loans: PTZ, approved loan, employer loan, etc.
How are the interests of the depreciable credit calculated?
The interest on the amortizable loan results from borrowing rate. They are calculated based on the principal you have left to repay, which means that they change over time. Indeed: during the first part of the depreciable credit, the monthly payments include more interest than capital. Then, over time, the share of interest decreases (being calculated on the capital remaining due) and that of capital increases.
This is the reason why a long-term loan is more expensive than a short-term loan: the longer the repayments take, the less the principal remaining decreases quickly, and the higher the interest calculated on it.