Lenders, panel and loan offer
Mortgage amortisation schedule: how to read and check it yourself
Amortisation schedule: verify each line with three checks, read the interest, capital and insurance, and see the effect of an early repayment.
The amortisation schedule details, instalment by instalment, the portion of capital repaid, the interest and the outstanding capital. It is verified line by line: the interest is calculated on the outstanding capital after the previous line, the capital amortised is the instalment minus this interest, and the new outstanding capital follows from this. The interest therefore weighs most heavily at the beginning, when this capital is at its highest.
By Sandy MASCART, mandataire d'intermédiaire en opérations de banque et en services de paiement ORIAS 26000541 sous le mandat de CDV PATRIMOINE & ASSURANCE (ORIAS 14005573)
Key points
- For a fixed-rate loan, the loan offer includes a schedule that allocates each instalment between capital and interest: this is the amortisation schedule.
- The interest for each line is calculated on the outstanding capital: it weighs most heavily at the beginning, when this capital is at its highest.
- Three checks verify a line: the interest, the capital amortised and the outstanding capital are deduced from one another, subject to rounding.
- An insurance premium based on the initial capital remains constant; based on the outstanding capital, it decreases with it.
- A partial repayment restarts from the outstanding capital; for an equal amount, shortening the term avoids more interest than reducing the instalment.
The amortisation schedule tells you, instalment by instalment, where your money goes: repaid debt, interest, insurance, outstanding balance. Check it, prepare an early repayment, and know the amount due on the day of a resale. See lenders, panel and loan offer and the loan offer line by line.
Who must provide you with this schedule, and for which loan?
For a fixed-rate loan, the offer includes a schedule that allocates each instalment between capital and interest (Article L. 313-25 of the Consumer Code). For a variable-rate loan, a notice and a simulation.
For a variable-rate loan, the schedule describes a hypothesis: see the variable-rate loan. Several loans in the offer? Request each schedule.
The columns, one by one
| Column | What it contains | What to check |
|---|---|---|
| Rank and date | The number of the instalment and its debit date | The first agreed date, and a number of lines equal to the stated duration |
| Instalment | The amount due under the loan, with or without insurance depending on the presentation | That it remains constant, unless a deferral or stepped payments are announced |
| Interest | The part of the instalment that remunerates the lender | That it decreases from one line to the next on a fixed-rate loan |
| Repaid capital | The part of the instalment that repays the debt | That it increases from one line to the next |
| Outstanding capital | What remains to be repaid after the instalment | That it decreases exactly by the repaid capital of the line |
| Insurance | The premium for the period, when the lender includes it | That it is constant or decreasing, depending on the calculation basis of the contract |
| Total debited | Instalment and insurance added together, when the column exists | That it is indeed the amount that leaves your account |
Without an insurance column, its cost is read elsewhere in the offer.
Check a line with three controls
Interest = previous outstanding capital × rate for the period. Amortised capital = instalment − interest. Is an equality incorrect? Submit a written query.
- The interest: a discrepancy of a few pence arises from the day count basis.
- The amortised capital: the only portion that reduces the debt.
- The outstanding capital: it falls to zero at the final instalment.
The amortised capital column totals the amount borrowed. On a in fine loan, it remains empty until the end.
Why does interest weigh so heavily at the start of a loan?
It is calculated on the outstanding capital, which is at its highest at the outset. This is arithmetic, not a clause.
- At the midpoint of the term, more than half of the capital remains.
- Extending the term initially costs more in interest.
The lines that do not resemble the others
- The first instalment covers the interest accrued since the release of funds.
- The repayment holiday: outstanding capital unchanged. See off-plan purchase.
- The steps of smoothed loans.
- The final line, to within a few pence.
Any other discrepancy must be flagged in writing before accepting the loan offer.
Insurance: on the initial capital or on the outstanding capital
On the initial capital, the premium remains constant. On the outstanding capital, it decreases. Two similar initial lines can conceal two very different total costs.
Add the column up to this term: you must find the amount stated. See the APR and the Lemoine Act.
Early repayment: shortening the term or reducing the instalment
The amount is deducted from the outstanding capital and the schedule is recalculated. In both cases, the subsequent interest decreases.
- Shortening the term removes entire lines of interest.
- Reducing the instalment avoids less of it.
The earlier you do it, the more you save. Request in writing the calculation for each formula. The penalty: early repayment.
After a renegotiation or a buy-out, a new schedule
A renegotiation proceeds via an addendum and a new repayment schedule. A buy-out creates a new loan, with its offer and its schedule.
The initial outstanding capital must be identical; otherwise, ask what has been added. The calculation: the renegotiation and the buy-out.
The line to re-read before selling or buying out
The outstanding capital on that date: higher than a rule of three would suggest. Keep each schedule.
Sandy MASCART, a mortgage intermediary working under mandate, does not decide on any granting of credit.
Considering a buy-out? Create your file or have your current loan assessed by telephone.
Sources
Read next
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- Understanding your loan offer: the twelve clauses to check before signing The twelve clauses of the loan offer, in the order of the document: what is negotiable, what the law caps, and the three points that cannot be rectified.
- Repaying your mortgage early: paying the compensation fairly Repaying early is a right. The compensation is due only if the contract provides it, capped at the lower of two calculations. The exempt cases.
- The TAEA: the single figure that compares two insurance policies, and how to read it What the TAEA actually measures, why a premium rate is not one, and the three normalisations without which it compares nothing.
- Calculating the monthly repayment on a mortgage: the formula in six steps, and its blind spots Calculate the monthly repayment on your mortgage in six steps, then see what the formula omits: insurance, guarantee, fees, APR and usury.
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