How does the mortgage rate compare: Equivalent principal, Equivalent principal and LPR? Organisation
The comparison of interest rates on mortgages cannot be based on figures alone, and the repayment method determines the total interest on your actual expenditure.
Many compare the annual interest rate of the loan to that reported by the bank, while ignoring the decisive impact of repayment on total interest. It is also a loan with a fixed monthly repayment of the principal equivalent of one million dollars, with a yearly interest rate of 4.2 years and a term of 30 years, but the principal repayment of the prior period is small and the total interest is the highest; the principal equivalent is fixed and interest is declining, and total interest is lower but the previous period is under pressure. In order to see the differences, it is suggested that the monthly provision and total interest for both options be calculated using the [lending rate comparison] (/finance) approach.
The essence of LPR and fixed interest rates
Currently, most mortgages are linked to LPR (interest rate on loan market quotations), which is re-pricing once a year, and interest rates decline and increase as the market goes down. If you judge that future interest rates will be lower as a whole, the floating rate will be more economical; if you seek absolute stability in the monthly supply and are unwilling to withstand fluctuations, you can choose a fixed rate. Note that once the weighting date and additional value are signed, they are usually fixed for a long period of time, and the details are clarified before the contract is signed.
- Equivalent principal: a fixed monthly job suitable for a stable cash flow Group
- Equivalent principal: Total interest is lower and suitable for prior repayments People
- Floating interest rates: subject to LPR changes, may be more economical in the long term
- Fixed interest rate: month-specific, suitable for risk-averse borrowing People
Three common traps for horizontal comparison
First, let's not be confused by the former N-year preferential rate, which is the standard rate to be restored after the preference expires. Second, early repayment of defaults, which vary widely from bank to bank, will have a direct impact on the flexibility of your subsequent optimization of liabilities, which can be referred to in the [advance repayment strategy] (/early-loan-repayment-strategy). Thirdly, while operating on a loan-for-housing loan appears to be at a lower interest rate, it involves a risk of compliance with the use of funds, and ordinary people should be cautious. The calculation of monthly contributions, total interest, and default money together is the only way to arrive at a real cost-saving solution.