How to Calculate a Mortgage Payment Step by Step

What is the French amortisation system?

The vast majority of mortgages in Spain use the French system: the monthly payment is constant throughout the life of the loan. What changes month to month is the proportion that goes to capital and interest. At the start, almost everything is interest; at the end, almost everything is capital repayment.

The monthly payment formula

The formula is: C = P × [r(1+r)ⁿ] / [(1+r)ⁿ−1], where P is the loan amount, r is the monthly rate (annual rate / 12) and n is the number of payments. For example, for €200,000 over 25 years at 3.5% nominal rate: r ≈ 0.00292; n = 300; C ≈ €1,001/month.

How much do you really pay in interest?

Total paid over 25 years would be 1,001 × 300 = €300,300 — that is €100,300 more than the loan amount. Reducing the term or rate by even half a point has a huge impact on this figure.

Fixed, variable or mixed?

A fixed-rate mortgage keeps the same rate throughout, giving stability but often starting higher. A variable rate is reviewed every 6 or 12 months based on Euribor, creating uncertainty. A mixed mortgage combines an initial fixed period (typically 5–10 years) with a subsequent variable tranche.

When does early repayment make sense?

The earlier in the loan life an early partial repayment is made, the greater the interest saving, because the outstanding balance is higher. Shortening the term saves more interest than reducing the payment, though the latter gives more monthly liquidity. Always check whether your mortgage has an early repayment fee.