HOMELOANS
BY
Equal Payment Mortgages
Equal weekly, fortnightly or monthly payments over the whole mortgage term. The payment may change from time to time if interest rates change. This mortgage type is sometimes called a Table Mortgage because lenders used to refer to a table to calculate what the payment would be.
EXAMPLE:
A
mortgage for $120,000 at an interest rate of 6% over a term of 25 years
would have "equal payments" of $773 per month. The total
interest cost over the term, assuming no interest rate change, would be
$112,000.
BENEFITS:
•
Payments are
maintained at a set level, subject only to interest rate movements.
•
Most affordable
amortising (ie loan is repaid over the term) loan structure.
DISADVANTAGES:
•
Repayment of loan
balance occurs more slowly until well into loan term.
•
Total interest costs
over full loan term are greater.