Mortgages
Constant-installment mortgage: installment and amortization schedule
Enter capital, annual rate, frequency and duration: the installment and the amortization table update instantly.
How a constant-installment amortization schedule works
The constant-instalment mortgage — amortized on what is variously called the French, annuity or level-payment method — is the most widespread repayment plan: the instalment stays identical for the whole term of the loan, but its composition changes over time. In the early instalments the interest share is higher and the principal share lower; as the plan progresses the ratio gradually reverses, until the final instalments consist almost entirely of principal.
This happens because the interest in each instalment is computed on the outstanding principal, which falls with every payment: for a given instalment, the less capital is left to repay, the less interest accrues, so the principal share can grow while the total stays constant. Where the rate is only fixed for an initial period, this schedule holds until that period ends — and the outstanding-principal column at that point is exactly the amount that will be refinanced at whatever rate applies then.
Numeric example: a €150,000 mortgage at 3.5% a year, repaid in 240 monthly instalments (20 years), produces an instalment of about €869.94 a month. In the first month roughly €437.50 is interest and €432.44 is principal; by the final instalment the proportion has almost completely reversed in favour of principal. Should the rate reset to 4.5%, the instalment recomputed on the outstanding balance would rise to about €948.89.
Common mistakes
- Comparing two mortgages on the instalment alone, without looking at the term: a lower instalment spread over a longer period can cost far more in total interest. The amortization schedule shows that total cost; the instalment on its own does not.
- Comparing headline rates instead of the annual percentage rate: only the APR bundles in arrangement fees and compulsory costs, and it is the figure regulators require lenders to disclose precisely so that offers can be compared on equal terms.
- Ignoring the costs that sit outside the schedule: arrangement and valuation fees, compulsory insurance, transfer taxes and notary or registration costs vary widely by country and are rarely financed by the loan itself, yet they determine how much you actually need to borrow.
Frequently asked questions
How is the instalment on a fixed-rate mortgage calculated?
Using the constant-instalment annuity formula: R = C × i / (1 − (1 + i)^−n), where C is the capital, i the interest rate per period and n the total number of instalments. Where the rate resets periodically, the same formula is applied again at each reset, to the outstanding principal and the remaining number of instalments.
Why do the first instalments contain more interest than principal?
Because interest is computed on the principal still outstanding, which is at its maximum at the start of the plan. As the outstanding principal falls, the interest share drops and the principal share rises, with the total instalment unchanged. This is also why overpaying early saves the most interest.
What changes between monthly, quarterly and annual instalments?
The frequency at which the outstanding principal is reduced, and the rate applied to each instalment: with monthly instalments the annual rate is divided over 12 periods, with quarterly ones over 4, and so on. For the same annual rate, a more frequent schedule generally means a slightly lower total interest cost.
Does this calculation cover remortgaging?
This calculator shows the plan of a standard constant-instalment mortgage. To model a remortgage — how the instalment changes with a different outstanding balance and remaining term — use the “Installment comparison” calculator, which puts every combination in a single table. Early repayment charges vary by country and are not included.
How this calculation works
The constant installment is calculated as R = C × i / (1 − (1 + i)^−n), where C is the loan amount, i is the interest rate per period (annual rate divided by the number of periods per year) and n is the total number of installments. The interest share of each installment is the remaining principal multiplied by i; the principal share is the difference between the installment and the interest share. The remaining principal is updated by subtracting the principal share each period.