Have you ever wondered how bank and other financial institution compute your house monthly amortization? There are different ways for financing your home, Pag-ibig, bank or in-house financing and these establishments use a factor rate. Monthly amortization composed of principal and interest rate payment regularly over a specified period of time.
You should educate yourself for the computation of your monthly amortization so that you will know how much money you will need to keep for you house monthly amortization.
Here are some data for your monthly amortization:
- Total Contract Price (TCP) of the property intent to buy
- Loanable amount
- Down Payment (DP) or equity required by developer. Developer usually required 20% down payment. Minimum equity is computed from the total contract price less the loanable amount
Minimum Equity = Total Contract Price – Loanable Amount - Interest Rate. This depends to the Pag-ibig, banks, in-house financing or developer
- Factor Rate. It is a daily rate on the loan
To show:
Assume that you will buy a house and lot, the total contract price is Php 2,500,000.00
Total Contract Price – 2,800.000.00
Interest Rate – 11.25%
Loanable Amount – 2,200,000.00
Down Payment – 500,000.00
Factor Rate – 0.0139168947 (10 years, 11.25%)
Monthly Amortization = Loanable Amount x Factor Rate
2,200,000 x 0.0139168947
Monthly Amortization = Php 30,617.17 per month for 10 years
It is simple to compute your monthly amortization once you have the complete data.