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How to Compute Monthly Amortization

June 5, 2020

How to Compute Monthly Amortization

How to Compute for Your Monthly Amortization

Looking to buy a new house with Micara Estates – Tanza? We’re making it easier for you with our affordable house and lot monthly amortization scheme.

We’ll be breaking down for you how our amortization scheme works and how you can compute for it yourself.

What is amortization and how does it work?

Amortization is the process of taking a loan and dividing it into several fixed payments which you can pay over a fixed period of time. Every month for a pre-determined number of years, you will be paying off the loan principal as well as the interest at different amounts, however, the total amount you pay for still remains the same every period.

For housing loans, monthly payments remain the same, but there are some parts of the loan that will change in the succeeding months.

This is because a portion of your monthly amortization goes back to the interest cost and settling the initial loan principal.

The biggest portion of your monthly amortization goes to the interest costs, or the fees you will pay your bank for the loan. This is also the highest at the beginning of the loan, especially in long-term loans. Most of your monthly amortization will go towards interest expenses, while the rest will be spent on the loan balance.

Don’t be scared if it seems your first few months or years are spent paying your interest. This will gradually taper off as you make more payments, and you’ll start paying more for your loan principal than your interest.

One thing to keep in mind – the goal when having an amortization is to pay it off as quickly as possible so that your interest rates don’t grow.

How to compute for monthly amortization payments

If you want to learn how banks compute for your monthly amortization, it’s quite simple once you learn the formula! Banks use a fixed factor rate to compute for your monthly installment payments.

To compute for your monthly amortization, you’ll need the following information:

  • Your property’s total contract price
  • Estimated loanable amount
  • Equity or down payment (which you can compute for by subtracting the loan amount from the property’s total contract price)
  • Bank’s interest rate

Here is a sample computation for the Felicia house model to show you how to compute for the monthly amortization.

Two-storey townhouse with 3 Bedrooms, 1 Toilet and Bath, Powder Room, Living Room, Dining Area, Kitchen and a Provision for Carport

Floor Area: 50 sqm.

Lot Area: 50 sqm.

Total Contract Price: 1,620,830.00

Reservation Fee: 10,000.00

Monthly Equity (12 months): 12,674.00

Est. Monthly Amortization (20 years): 12,760.00

Using this sample computation, you’re expected to pay P12,760 every month for your monthly amortization. You’ll need to pay your monthly amortization every month for 20 years in order to pay off your total contract price of P1,620,830.00 (plus interest).

Not to worry. We have our own built-in online amortization calculator for Micara Estates – Tanza to make it easier for you to compute for your monthly amortization for the Felicia house model and Portia house model!