Equal payment vs equal principal mortgage calculator
Compare equal payment (annuity) and equal principal mortgage schedules side by side. Free, no signup, mobile friendly.
How to read the result
Equal payment keeps your monthly payment the same across the loan term; equal principal keeps the principal portion the same and front-loads the interest. Use this calculator before you sign a mortgage to see which schedule costs less in total.
Frequently asked questions
Which is cheaper? Equal principal usually costs less in total interest because you pay down the principal faster.
Can I switch mid-term? Most lenders allow extra principal payments at any time, which mimics the equal principal effect without changing your contract.
Equal payment vs equal principal: what is the difference?
These are the two most common ways to repay a mortgage. With the equal payment (annuity) method, you pay the same total amount every month for the whole term. Early payments are mostly interest; later ones are mostly principal. With the equal principal method, you pay back the same slice of principal every month, plus interest on the remaining balance — so your payments start higher and step down over time.
The total interest you pay is usually lower with equal principal, because your outstanding balance shrinks faster. But the early monthly payments are higher, which is exactly the squeeze many households cannot afford in the first years.
Which repayment plan should you choose?
- Choose equal payment if your income is fixed and you value predictability. Budgeting is trivial: the number never changes.
- Choose equal principal if you can comfortably afford higher early payments and want to minimise total interest over the full term.
- Planning to prepay or sell early? The gap between the two methods shrinks dramatically — run both scenarios below before deciding.
How to use this calculator
Enter the loan amount, annual interest rate, and term in years. The tool computes both repayment schedules side by side: first-month payment, final-month payment, total interest, and total repaid. Everything is calculated instantly in your browser — the numbers never leave your device.
FAQ
Is the difference really that big?
On a long loan at a high rate it can be substantial — often several percent of the loan amount in saved interest. On short or cheap loans the difference is small. Always compare with your actual numbers rather than a rule of thumb.
Can I switch methods later?
Many banks allow a one-time switch, sometimes for a fee. If you are considering it, compare the remaining-interest figures for both methods using your current outstanding balance.
Does this calculator store my numbers?
No. It runs entirely in your browser and nothing is uploaded or saved.
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Pretty-print rates before you compare them.
How to compare the two repayment methods
- Enter the loan amount, the annual interest rate and the term in years.
- Click Run to see both schedules side by side: the monthly payment, the total interest over the life of the loan, and how the balance falls each month.
- Compare the first-month payment, not just the total — equal principal starts higher and ends lower, which is the whole trade-off.
- Change the term or rate to see how sensitive each method is to them.
The two methods explained
Equal payment ( annuity / amortised ) keeps the monthly payment
constant for the entire term. Early payments are mostly interest and only
slightly reduce the principal; the proportion flips gradually, so by the final
years you are mostly repaying capital. The payment is calculated as
M = P × r × (1+r)^n / ((1+r)^n − 1), where P is the principal, r the
monthly rate and n the number of payments.
Equal principal ( straight-line capital ) repays the same slice of capital
every month — P / n — plus interest on whatever is still outstanding.
Because the balance falls faster, the interest component shrinks every month, so
your payment starts high and declines. Total interest is always lower than under
equal payment, because you are not carrying as much debt for as long.
Which one should you choose?
The honest answer depends on cash flow rather than arithmetic. Equal principal costs less overall but demands significantly more in the early years — often 20–30% more in the first months — which is exactly when moving costs, furnishings and other expenses are highest. It suits borrowers with high or rising income, people who plan to sell or refinance within a few years, and anyone who expects to make large extra repayments, since the lower outstanding balance compounds in their favour. Equal payment suits steady, predictable budgets and anyone who wants the payment to shrink in real terms as inflation and salary growth catch up with it. If you are likely to invest the difference productively, the cheaper-looking option is not automatically the better one.
What this calculator leaves out
The figures are the pure loan maths. Real mortgage payments also include property tax, home insurance, mortgage insurance (PMI or its local equivalent), HOA fees and closing costs, none of which are modelled here. Prepayment penalties, rate resets on adjustable loans, and fees for early settlement can all change the comparison materially. Treat the output as a clear comparison of the two repayment methods, and confirm the actual numbers with your lender's disclosure documents before signing anything.
FAQ
How much less interest does equal principal really save?
It varies with rate and term, but on a typical 30-year loan it is often 10–20% of the total interest. Run your own numbers here — the gap widens with higher rates and longer terms.
Can I switch methods later?
Sometimes, depending on the lender and the contract, though switching usually triggers a re-amortisation and possibly a fee. Ask before signing.
What about making extra payments?
Extra payments against principal shorten the loan and cut interest under both methods. Under equal payment, ask the lender to apply them to principal rather than to future scheduled payments, otherwise you prepay interest rather than debt.
Is my loan data uploaded?
No. All calculations happen in your browser; nothing is sent, stored or logged.