Simulate your monthly payments using the French amortization system and analyze interest savings from early partial repayments.
| Year | Annual Payment | Principal Paid | Interest Paid | Outstanding Principal |
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A mortgage is a debt instrument, secured by the collateral of specified real estate property, that the borrower is obliged to pay back with a predetermined set of payments. The calculations of standard fixed-rate mortgages primarily follow the French Amortization System, which is characterized by constant monthly payments throughout the lifetime of the loan, assuming interest rates do not fluctuate.
Under this system, the fixed monthly payment ($M$) is calculated mathematically using the following formula:
M = P * [ r(1 + r)^n ] / [ (1 + r)^n - 1 ]
Where:
In the early years of the mortgage, a substantial portion of the monthly payment goes toward paying off the interest, while only a small portion goes toward reducing the principal. As time progresses, this ratio shifts, with more of the payment going toward the principal and less toward interest.
Making a partial early repayment allows you to pay down a portion of your outstanding principal balance directly. This immediately reduces the interest that accumulates in all subsequent months, giving rise to two repayment strategies:
The French amortization system is the most common mortgage structure. It features constant monthly payments throughout the loan term, where the interest portion decreases and the principal repayment portion increases with every payment.
Reducing the loan term generally saves significantly more money because it shortens the time interest is allowed to accumulate on your balance. Reducing the monthly payment increases your monthly liquid cash flow, which is helpful if your budget is tight.
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