Advanced Mortgage Simulator

How the French amortisation system works

This is the method used by practically all mortgages in Spain and is characterised by a constant monthly payment throughout the life of the loan. What varies month to month is its internal composition. Each month the interest is calculated first by applying the monthly rate to the outstanding capital; the rest of the payment goes towards repaying principal. Since the outstanding capital falls with each payment, the following month's interest is lower and the portion repaying principal rises. The result is that at the start of the loan you pay mostly interest and very little capital, while in the final years the opposite happens. That is why early repayment is far more profitable in the first years.

Worked example

For a €200,000 mortgage at 3% over 30 years, the monthly payment is about €843. On the first instalment, interest is 200,000 × 0.03 / 12 = €500, so only €343 repays capital. Ten years later, with outstanding capital near €152,000, the month's interest falls to about €380 and repayment rises to €463. In the mortgage's final year, virtually the entire payment goes to capital. Over the thirty years you will have paid roughly €103,500 in interest alone.

How to read the amortisation schedule

The schedule lets you see exactly how much you owe at any point, which is essential if you are considering early repayment or selling the property before paying it off. Pay particular attention to the outstanding capital column: many people are surprised to find that after ten years of payments they still owe more than 75% of the original loan. Compare the total interest across different terms too: extending from twenty to thirty years reduces the payment by about €266 a month but makes the loan more than €37,000 more expensive. As a practical rule, choose the shortest term your budget can comfortably bear, and remember you can always repay early if your situation improves.