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.
How the two repayment methods differ
Home loans are repaid by one of two broad methods. Under level payment, the monthly amount — principal plus interest — stays the same, which makes household planning easier, but in the early years most of each payment goes on interest and the principal falls only slowly. Under level principal, the amount of principal repaid each month is fixed, and since interest is charged on a shrinking balance the payment starts at its heaviest and eases over time.
Compared at the same loan amount, rate and term, the total repaid is lower under level principal. Because the principal falls faster, the balance attracting interest is smaller throughout. The trade-off is that the early payments are higher, which can also count against you at the underwriting stage. Enter the loan amount, the rate and the term, and this tool sets the monthly payment, total repayment and total interest of both methods side by side.
How to compare the methods
- Enter the loan amount Enter it in units of ten thousand yen. Whether to include fees is a matter for the borrowing you actually plan.
- Enter the annual interest rate On a variable rate, bear in mind that the calculation assumes the rate never changes.
- Enter the repayment term Enter it in years. The longer the term, the greater the total repaid.
- Compare the two results Monthly payment, total repayment and total interest appear side by side, so the difference is plain.
Tips for getting more out of it
- 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.
Where this helps
Choosing a method before borrowing
Seeing the gap in total repayment and in the early payment at once lets you weigh them against the household budget.
Setting up the question of early repayment
Early repayment helps under either method, but since the principal falls differently, so does the benefit.
Checking a lender's proposal
Confirm that the repayment plan you have been shown matches your own calculation.
Thinking about how much to borrow
Gives you the means to work back from the early payment your budget can absorb.
Home loan terms explained
- Level payment
- The method under which the monthly amount of principal plus interest stays constant. Most home loans use it as standard.
- Level principal
- The method under which the principal repaid each month is fixed. Payments start heavy and ease over time.
- Principal
- The sum borrowed itself. Until it falls, the interest burden does not fall either.
- Interest
- The charge obtained by applying the rate to the outstanding balance. It grows with the balance and with the term.
- Total repayment
- The sum of principal and interest paid across the whole term. The difference between methods shows up here.
- Early repayment
- Paying down principal ahead of the agreed schedule, which reduces the interest that would otherwise accrue.
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.