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Home loan repayment calculator: What does mortgage repayment mean?
Monthly home loan repayment
Most people will take up a mortgage loan from a bank when they purchase a property, and they will be required to repay the home loan on a monthly basis over an agreed period of time until they pay the principal and accrued interest back to the bank in full. The monthly repayment is known as mortgage repayment.
As long as you make your repayments every month, your mortgage balance will decrease and it will be repaid at the end of the term. Generally, the loan tenure is dependent on your age - the younger you are, the longer your loan tenure. You may use our mortgage calculator to find out your monthly loan repayment amount.
Not sure how your mortgage is being calculated?
For example, a housing loan of $500,000 at an interest rate of 2.5% over a 10-year period will work out to be a monthly repayment of $4,713, with a total interest cost of $65,560.
If you decide to extend the loan tenure to a 30-year period and qualify for it, the monthly repayment is reduced to $1,976. That said, your total interest cost would be $211,360. Effectively, you will end up paying $145,800 more in interest if you take a 30-year loan instead of a 10-year loan.
By using our mortgage calculator tool, you can plan your monthly expenses well.
What affects your mortgage repayment amount?
|Changes in mortgage loan||Cost of home ownership|
|Longer duration||Higher as you are paying more interest cost|
|Shorter duration||Lower as your monthly repayment goes to clearing the principal loan amount|
|Interest rate goes up||Higher repayment amount|
|Interest rate goes down||Lower repayment amount|
Mortgage loan tenure
Regulations have capped maximum loan tenures for HDB flats and non-HDB properties at 30 and 35 years respectively.
The percentage of your property's price that you can loan is also affected by the length of your mortgage loan tenure.
LTV limit for your first bank loan
- 75% if your loan tenure is less than 30 years
- 75% if your loan period ends when the borrower's age hits 65 years
- 55% if your loan tenure is more than 30 years
- 55% if your loan period ends when the borrower's age is above 65
LTV limit for your second bank loan
- 45% if your loan tenure is less than 30 years
- 45% if your loan period ends when the borrower's age hits 65 years
- 30% if your loan tenure is more than 30 years
- 30% if your loan period ends when the borrower's age is above 65
Mortgage loan amount
The amount of the borrowed sum depends on the valuation of your desired home. The more you pay for your home, the more you will need to borrow from the bank. This in turn affects how much you will need to pay every month for your mortgage repayment.
Mortgage loan interest rate
When you make your monthly loan repayment, part of the monthly sum goes to paying the interest, and the rest offsets the principal loan amount. If you manage to find a mortgage package that offers lower interest rate, you can reduce your total cost for your mortgage loan.
You can find out your estimated monthly repayment, principal interest and interest payment easily within two minutes if you use our mortgage home loan repayment calculator. Therefore, it is important to find a mortgage loan deal that best suits your situation.
If you wish to receive personalised recommendations on mortgage loan packages, feel free to get in touch with one of our friendly Mortgage Experts
How do I repay my mortgage?
Methods of repayment
There are two ways to repay your monthly housing instalments - CPF savings or cash. If you wish to pay via cash, there are many platforms to pay such as GIRO, PayNow, internet banking, AXS channels, and cash payment kiosks at HDB branches
It is important to note that the initial repayments will mainly be for the interest. As such, you will find that repayments you have made don't go into paying off the principal amount you owe to the bank.
Mortgage repayment by cash
By using cash to pay for your home loan, it means you will leave your savings intact in your CPF. This allows your money to grow and compound at the 2.5% interest rate that CPF Ordinary Account (OA) offers.
Moreover, in the event of sudden retrenchment or other unfortunate situations where you run out of cash for monthly instalments, your CPF savings can act as a backup to finance your mortgage.
Mortgage repayment by CPF
Choosing to make mortgage repayment using your CPF savings means you get to keep your disposable cash for other purposes. Unlike your CPF savings which have restricted uses, having cash on hand lets you spend it the way you want. You can use it for home renovation or invest it to earn higher returns.
Mortgage repayment by both CPF and cash
Monthly instalments on your mortgage can also be paid through a combination of CPF and cash. With this approach, you have control over the proportion of the monthly instalment that is payable via cash and CPF savings.
Having a portion of your monthly instalment paid with cash helps you exercise financial discipline. It forces you to set aside cash from your monthly salary for your home. Some find this a good way to cultivate 'forced savings' for yourself.
Early mortgage repayment: Things to consider
There are benefits and consequences of early mortgage repayment, which you may wish to consider before making the decision.
If you use the extra cash you have to pay off your mortgage early, you may miss the opportunity to invest in other assets such as real estate or stocks, which generate a higher return.
If you secured a low interest rate on your mortgage, you may want to invest the extra cash in opportunities for higher returns. This gives you the opportunity to earn higher interest on your investments while paying off a low-interest debt.
However, if the interest rate on your loan is higher than what you may get from investing, repaying the mortgage loan may be a smarter move.
If you pay off your mortgage early, you will have a lot more money preserved as value in your property. This makes your portfolio less liquid and harder to meet unforeseen expenses and emergencies.
Do check with your mortgage lender if there are any penalties for early repayment. These penalties can increase the cost of paying off your mortgage early and wipe out the interest savings that you had wished to earn.
Ultimately, the decision to pay off your mortgage early should be dependent on your goals, priorities, and individual financial situation. Thus, it is important to consider all the pros and cons before making a decision on your mortgage loan.
For a breakdown of your monthly mortgage, you may use our mortgage calculator.
Tips on financing your home loan
Assess your financial situation
Making a decision on your mortgage is entirely dependent on your personal needs. As every situation is different, it may be a good idea to speak to one of our Mortgage Experts
, as they can easily assess your situation and give you tailored advice, at no cost to you.
Opt for a shorter loan repayment period
By opting for a shorter mortgage tenure, you can save on the interest paid on your loan. However, do take note that the monthly payment will be slightly higher.
You may wish to speak to our Mortgage Experts
to find the optimal loan repayment period for you based on your financial situation. In addition, we have an interactive mortgage calculator for you to change the parameters of the loan to visualise your potential savings.
Refinance when the time is right
If you are nearing the end of your mortgage lock-in and/or clawback period, you may want to refinance for a variety of reasons.
Finding a suitable refinancing package may help to lower interest costs, reduce loan tenure, or ease your cash flow. To read more information on how to refinance your home loan, click here