03.2023 Life Guide
How to reduce the pressure of repayment by raising the interest rate of housing loan without interest
Far Eastern International Bank / Wu Ruimin
Affected by global inflation, the central bank has raised interest rates four times from March to the end of December 2022, and the mortgage rates of all banks have also risen by 0.625% to 0.68%. Taking the mortgage amount of NTD10 million and the loan application for 20 years as an example, the original loan interest rate is 1.4%. After this wave of interest increase, the monthly payment amount will increase from NTD47796 to NTD50707~50969. For the general office workers, in addition to supporting the rising living expenses, they also have to face the heavy pressure of housing loans every month. How can I pay the mortgage painlessly? This issue of "Finance Column" reorganize four plans to reduce your burden.
In order to facilitate the trial calculation and evaluation, the following plans will take the mortgage amount of NTD10 million, the loan application for 20 years, and the interest rate of 2.08% as an example for trial calculation and explanation.
Scheme I: reduce interest rate
When it comes to reducing the pressure of housing loans, people usually intuitively think of reducing interest rates. But in fact, the range of interest rates that banks can reduce is limited, which does little help to reduce the amount of monthly payments. For example, if the interest rate is reduced from 2.08% to 2.05%, the monthly payment amount will only be reduced by NTD143.
Original monthly payment amount
NTD50,969
Amount paid in new month
NTD50,826
Reduce expenses every month
NTD143
Option 2: extend the term of the loan
If the mortgage has been paid for several years, the application for extension of the loan term has a significant effect on reducing the monthly payment amount; However, as the payment period increases, the total interest expenditure will also increase. For example, if the loan has been paid for five years, the balance is about NTD7.91 million. If the application for extension of the term is 20 to 30 years, the monthly payment amount can be reduced by NTD10653 to 21414.
Original monthly payment amount
NTD50,969
Amount paid in new month
NTD 40,31629,555
Reduce expenses every month
NTD10,65321,414
Scheme III: Apply for grace period
Since only interest is required to be paid during the grace period, this scheme has the most significant effect on reducing the monthly payment amount; However, at present, various banks have many regulations on this issue, and usually only grant a grace period of 1 to 2 years. After the end of the period, the principal and interest will be shared equally. However, because the grace period has been applied for, the period of amortization of principal will also be shortened from 20 years to 18 to 19 years, and the monthly payment amount is even heavier than the original burden. It is suggested that the future salary income of yourself or your family should be included in the assessment before applying, and whether the increase of income can bear the monthly mortgage payment amount at that time.
If the house loan has been paid for 5 years and the balance is about NTD7.91 million, and the grace period is now applied for 2 years, the monthly payment amount can be reduced by NTD37258 during this period, but will rise to NTD57913 after the grace period.
Original monthly payment amount
NTD50,969
Amount paid in new month
NTD13,711
Reduce expenses every month
NTD37,258
Monthly payment after grace period: NTD57913
Scheme IV: Change the amortization method
There are two ways to amortize housing loans: "average share" and "circular type". Among them, "average share" is the most common. As the name implies, it is to amortize the principal and interest equally; As for "revolving", the feature is to borrow and return as soon as possible. Interest is calculated only when interest is paid every month. Like the grace period, the effect of reducing the monthly payment amount is the most significant.
However, it should be noted that although the "revolving" amortization method can significantly reduce the monthly payment amount in the short term, the total interest expenditure is the highest because only interest is paid and the principal is not amortized; Not only that, the principal must be repaid at one time after the end of the loan period, and the people will face the highest repayment pressure at that time.
Similarly, take the housing loan payment for five years, with the balance of about NTD7.91 million as an example. If the amortization method is changed from "evenly distributed" to "circular", the monthly payment amount can be reduced by NTD37258, but when the loan matures, NTD7.91 million must be repaid at one time.
Monthly payment amount of "sharing type"
NTD50,969
"Revolving" crescent payment amount
NTD13,711
Reduce expenses every month
NTD37,258
"Revolving type" needs to repay the loan principal NTD7.91 million at one time when the loan expires.
In order to provide more diversified housing loan options for the public, Far Eastern International Bank launched the "Happy Re-loan Project", with a time-limited discount of NTD3000 for the handling fee, so as to facilitate people to choose the "revolving" amortization method according to their personal needs and reduce the repayment pressure.
Finally, I would like to remind you that no matter what plan you choose, you must carefully evaluate it. In addition to the actuarial short-term monthly payment to reduce the benefits, you should also confirm the overall impact of the loan period and the individual's affordability, so that you can really reduce the burden and make life easier.
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In order to facilitate the trial calculation and evaluation, the following plans will take the mortgage amount of NTD10 million, the loan application for 20 years, and the interest rate of 2.08% as an example for trial calculation and explanation.
Scheme I: reduce interest rate
When it comes to reducing the pressure of housing loans, people usually intuitively think of reducing interest rates. But in fact, the range of interest rates that banks can reduce is limited, which does little help to reduce the amount of monthly payments. For example, if the interest rate is reduced from 2.08% to 2.05%, the monthly payment amount will only be reduced by NTD143.
Original monthly payment amount
NTD50,969
Amount paid in new month
NTD50,826
Reduce expenses every month
NTD143
Option 2: extend the term of the loan
If the mortgage has been paid for several years, the application for extension of the loan term has a significant effect on reducing the monthly payment amount; However, as the payment period increases, the total interest expenditure will also increase. For example, if the loan has been paid for five years, the balance is about NTD7.91 million. If the application for extension of the term is 20 to 30 years, the monthly payment amount can be reduced by NTD10653 to 21414.
Original monthly payment amount
NTD50,969
Amount paid in new month
NTD 40,31629,555
Reduce expenses every month
NTD10,65321,414
Scheme III: Apply for grace period
Since only interest is required to be paid during the grace period, this scheme has the most significant effect on reducing the monthly payment amount; However, at present, various banks have many regulations on this issue, and usually only grant a grace period of 1 to 2 years. After the end of the period, the principal and interest will be shared equally. However, because the grace period has been applied for, the period of amortization of principal will also be shortened from 20 years to 18 to 19 years, and the monthly payment amount is even heavier than the original burden. It is suggested that the future salary income of yourself or your family should be included in the assessment before applying, and whether the increase of income can bear the monthly mortgage payment amount at that time.
If the house loan has been paid for 5 years and the balance is about NTD7.91 million, and the grace period is now applied for 2 years, the monthly payment amount can be reduced by NTD37258 during this period, but will rise to NTD57913 after the grace period.
Original monthly payment amount
NTD50,969
Amount paid in new month
NTD13,711
Reduce expenses every month
NTD37,258
Monthly payment after grace period: NTD57913
Scheme IV: Change the amortization method
There are two ways to amortize housing loans: "average share" and "circular type". Among them, "average share" is the most common. As the name implies, it is to amortize the principal and interest equally; As for "revolving", the feature is to borrow and return as soon as possible. Interest is calculated only when interest is paid every month. Like the grace period, the effect of reducing the monthly payment amount is the most significant.
However, it should be noted that although the "revolving" amortization method can significantly reduce the monthly payment amount in the short term, the total interest expenditure is the highest because only interest is paid and the principal is not amortized; Not only that, the principal must be repaid at one time after the end of the loan period, and the people will face the highest repayment pressure at that time.
Similarly, take the housing loan payment for five years, with the balance of about NTD7.91 million as an example. If the amortization method is changed from "evenly distributed" to "circular", the monthly payment amount can be reduced by NTD37258, but when the loan matures, NTD7.91 million must be repaid at one time.
Monthly payment amount of "sharing type"
NTD50,969
"Revolving" crescent payment amount
NTD13,711
Reduce expenses every month
NTD37,258
"Revolving type" needs to repay the loan principal NTD7.91 million at one time when the loan expires.
In order to provide more diversified housing loan options for the public, Far Eastern International Bank launched the "Happy Re-loan Project", with a time-limited discount of NTD3000 for the handling fee, so as to facilitate people to choose the "revolving" amortization method according to their personal needs and reduce the repayment pressure.
Finally, I would like to remind you that no matter what plan you choose, you must carefully evaluate it. In addition to the actuarial short-term monthly payment to reduce the benefits, you should also confirm the overall impact of the loan period and the individual's affordability, so that you can really reduce the burden and make life easier.
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