How Mortgage Repayments are Calculated

There are many factors to consider by lenders to determine the regular payment amount by the borrower. The money paid to the mortgage goes towards the interest and overall principal amount borrowed. The interest is seen as the amount paid to the lender for their services. Mortgage insurance can also be an optional service in a mortgage.


Amortization is seen as the amount of time it takes for the borrower to pay off the mortgage to the lender. The longer the time frame given for payments, the lower the monthly payments will be, but the interest will be higher. Amortization can go up to 25 years if the down payment is less than 20% of the home’s purchase price.

Interest Rate

Interest rates need to be applied to any type of loan or mortgage to pay for the risk that the lender is taking by giving a mortgage. The higher the interest rate is, the higher the mortgage payment will be every month. The interest rate can be negotiated every time the mortgage is renewed.

At any given time before signing the agreement, interest rates can be negotiated by the borrower. The interest rates do, however, depend on a variety of factors, including the length of the mortgage term, credit history, employment, type of lender, and more. It’s important to shop around with various lenders before making a final decision.

When consulting with lenders, they will have various types of interests to choose from depending on the lender and other factors. Some of the types of interest include fixed, variable, and hybrid. Depending on budget and circumstances, only one or two options may be available to the borrower.

Variable interest rates provide the borrower with the chance of paying off the mortgage quicker, but interest will change from time to time. Fixed interest rates will be higher but stay constant throughout the term. Hybrid interest rates are combinations involving both fixed and variable interest rates and moving from one to the other.