The repayment of a mortgage loan is not just about paying a fixed monthly installment for twenty years. Behind each payment, the distribution between amortized capital and interest varies, and this mechanism directly influences the total cost of the credit. Understanding the calculation methods that govern this operation allows for more informed decisions, whether at the time of subscribing or during repayment.
Constant amortization or constant monthly payment: two calculation logics to distinguish
Most mortgage loans in France operate on the principle of constant monthly payment (classic amortizable loan). Each month, the borrower pays the same amount, but the portion of interest gradually decreases in favor of the repaid capital. At the beginning of the loan, interest represents the majority of the payment. Towards the end, it is the opposite.
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The other logic, less common for individuals, is based on a constant amortization of the capital. Here, the portion of capital repaid is the same each month, but the interest calculated on the remaining capital reduces the monthly payment over time. The initial payments are heavier, but the total cost of interest is lower.
This choice is not trivial. A borrower with stable but limited income will prefer the constant monthly payment to maintain their monthly budget. An investor in rental properties, looking to maximize the deductibility of interest at the beginning of the loan, may find a different tax advantage depending on the method chosen. The mortgage repayment calculation methods rely on precise mathematical formulas that incorporate rates, duration, and borrowed capital.
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Remaining income and HCSF standard: the calculation that the bank does for you
Calculating your theoretical monthly payment is not enough. The bank applies its own filters before approving a mortgage application. Since the tightening of HCSF recommendations, the maximum debt ratio is set at 35% of net income, including borrower insurance.
This ceiling is not the only criterion. Lenders also examine the remaining income, which is the amount available after paying monthly installments and fixed charges. Crédit Agricole, for example, mentions frequently requested thresholds:
- Between 700 and 1,000 euros for a single person, depending on geographical location and lifestyle
- Between 1,000 and 1,500 euros for a couple, with an additional amount per dependent child
- These thresholds can reduce the maximum accepted monthly payment even if the theoretical debt ratio remains below 35%
A borrower with high income but three dependent children may be offered a lower monthly payment than what the gross debt ratio calculation would allow. The remaining income sometimes takes precedence over the debt ratio in the bank’s analysis.
Early repayment: a trade-off that depends on your credit rate
Repaying your loan early seems intuitively advantageous. The reality is more nuanced, and the available data does not allow for a universal rule.
For loans taken out before 2022 at very low rates (below 2%), repaying early means giving up money that could generate a higher return if invested elsewhere. The savings in interest are marginal, while investing in other placements may prove more rational.
On the other hand, for recent loans concluded at rates above 3.5 to 4%, the trade-off more often favors early repayment. The remaining interest to be paid over the residual term represents a significant cost that repayment allows to eliminate.
Early repayment fees to include in the calculation
Banks apply early repayment penalties (IRA) to compensate for lost interest. This amount is capped by law, but it must be included in the calculation to determine if the operation remains profitable. Some contracts provide exemptions from IRA in specific cases (job transfer, death of a spouse). Checking the clauses of your loan offer before any steps is a necessary preliminary step.
Borrower insurance: the often underestimated cost item in the overall calculation
Borrower insurance represents an increasing share of the total cost of a mortgage loan. Over a long-term loan, its cumulative weight can rival that of the interest itself, especially when the nominal rate of the loan is low.
Two calculation methods coexist:
- Insurance calculated on the initial borrowed capital, where the premium remains fixed throughout the loan term, regardless of the remaining capital
- Insurance calculated on the remaining capital, where the premium decreases over repayments, reducing the total cost but increasing the initial payments
The Lemoine law allows for changing borrower insurance at any time, without fees or penalties. This lever modifies the overall cost of the credit and deserves to be recalculated regularly, especially for borrowers who took out a bank group insurance at the signing.
Include insurance in the APR to compare
The annual percentage rate (APR) includes insurance, processing fees, and guarantee fees. It is the only reliable indicator for comparing two loan offers. Comparing nominal rates without including insurance skews the analysis and can lead to choosing the most expensive offer.
A borrower who renegotiates their insurance during the loan modifies their actual APR, even if the nominal rate of the loan remains unchanged. This recalculation, often overlooked, can represent substantial savings over the remaining term of the loan.
The calculation of mortgage repayment is not limited to a mathematical formula applied to the rate and duration. The remaining income conditions the monthly payment as much as the debt ratio, the choice of insurance mode weighs on the total cost, and the opportunity for early repayment depends on the vintage of your credit. Each parameter interacts with the others, making the personalized amortization table more useful than any generic simulation.