Mortgage Repayment Method Comparison (Equal Installment vs Equal Principal)
Enter the loan amount, interest rate, and term to compare the monthly payment, total repayment, and total interest of equal installment repayment versus equal principal repayment, side by side.
Tips
- Equal principal repayment has the highest first payment of the two methods, and mortgage screening is often based on this first payment when determining how much you can borrow.
- For the same loan amount, rate, and term, equal principal repayment results in lower total interest, but it puts more strain on your household budget in the early years.
- When the interest rate is 0%, no interest accrues at all, so the monthly payment is exactly the same under both methods.
- Most mortgages default to equal installment repayment, but some lenders let you choose equal principal repayment instead, so it's worth checking before signing.
- Pairing this with the companion mortgage calculator (equal installment only, which also shows the year-by-year balance trend) lets you dig into more detail.
Frequently Asked Questions
Side Note — Why Equal Principal Repayment Costs Less in Interest
Equal installment repayment and equal principal repayment produce different total interest amounts even with the same loan amount, rate, and term. The reason is simple: interest only accrues on whatever balance is still outstanding at that point in time. Equal principal repayment keeps the principal portion fixed every month, so the balance shrinks at a fast, steady pace from the very start. Equal installment repayment instead keeps the total payment fixed, meaning the principal portion is still small early on, so the balance shrinks more slowly.
The more slowly the balance shrinks, the longer a larger amount stays outstanding as the base for interest calculations, which is why equal installment repayment ends up with more total interest. Equal principal repayment, despite its heavier early payments, compresses the balance faster, so the total interest paid works out lower over the life of the loan.
That said, equal principal repayment's first payment is higher than equal installment's, and mortgage screening commonly calculates the debt-to-income ratio based on that first payment. If your borrowing capacity is tight, you may have little choice but to go with equal installment repayment, since it's easier to pass screening.
In practice, most mortgages in Japan default to equal installment repayment because the fixed payment makes household budgeting easier. Borrowers who actively choose equal principal repayment tend to be those who expect their income to rise in the future but want to minimize total cost, or those planning early payoff through prepayments.