With housing prices climbing, buying a home is no longer an easy task for the average person. Choosing the right mortgage repayment method is important, but the pitfalls of equal principal and interest repayment have already emerged. In the face of cold data, we need to look at the "time bomb" of mortgages rationally.
As the saying goes, a house is one of the "parents of food and clothing", but the various pitfalls in the process of buying a house also make people sweat. After all, the amount of the mortgage is large and the term is long, and the choice of repayment method directly affects the quality of life. So, what's the problem with equal principal and interest repayment, and how is it different from equal principal repayment? Let's take a look.
What is equal principal and interest and equal principal repayment
Equal repayment of principal and interest means that the total principal and interest of the loan are divided equally on a monthly basis, and the monthly repayment amount is fixed. Equal principal repayment means that the loan principal is divided equally on a monthly basis, and the sum of the interest after repaying the same amount of principal each month, plus the remaining principal after interest, is the monthly repayment amount.
To put it simply, the former has a fixed monthly payment, while the latter has a decreasing monthly payment. The repayment of equal principal and interest is the interest in the early stage, and the principal decreases slowly; Equal principal repayment is to reduce the principal first, and the interest will be reduced, and the repayment pressure will decrease month by month.
Zhejiang Mr. Liu's house slave lamented
Some time ago, the experience of a man in Zhejiang, Liu, sparked heated discussions. He took out a loan of 2.08 million yuan to buy a house, and repaid it with equal principal and interest, with a monthly repayment of 9,100 yuan. As a result, after 9 years of repayment, it was found that the principal had not been reduced, and the balance was still hundreds of thousands of yuan!
It turned out that Mr. Liu's previous repayment was all interest, and the principal was not reduced at all. By the time he realized the problem, he had already "fallen into the pit of house slaves". According to the data of the regulatory authorities, 60 percent of housing loans in mainland China are repaid with equal principal and interest.
How can we avoid mortgage traps?
Buyers should never be tempted by a low down payment and read the loan contract carefully. Otherwise, you may also become the next "Mr. Liu". If the repayment of equal principal and interest has been adopted, the bank may take the initiative to request the bank to repay the loan in equal principal instead. According to the Civil Code, the signatory may negotiate to change unreasonable terms.
Regulators should strictly regulate bank credit behavior to prevent pushing up housing prices and stimulating demand. The optimized repayment method should take into account the interests of home buyers. Buyers should look at housing prices rationally and not live only at high prices. Budget reasonably and choose the most suitable mortgage method for you.
How to choose the best mortgage payment method for you
If financial conditions allow, it is recommended to choose equal principal repayment. Especially for long-term mortgages, the monthly pressure is getting less and less, and the quality of life is improving. Of course, it varies from person to person. If you cannot afford to repay the principal in equal amounts, you can choose a shorter loan term to reduce your total interest expense.
Beware of the risk of floating interest rates. Recently, many countries have raised interest rates due to inflation, and the mainland may look in the mirror, which will directly affect the cost of housing loans. On the way to buy a house, risks are everywhere, and it is necessary to pay close attention to possible problems such as broken capital chains and hidden dangers of decoration loans. Only by taking a long-term view and being down-to-earth can we avoid the traps and fight steadily.
Dear readers, what do you think about the repayment method for buying a house? Maybe you have other good suggestions? Feel free to share your thoughts in the comment section!
The whole network has been opened to protect rights and carry plagiarism reports