Ever wondered how banks and financing institutions come up with a monthly amortization figure for your home loan?  There are several options for financing your home purchase – Pagibig, bank or in-house financing – but all these institutions use what is called a factor rate in computing your monthly amortization or what is commonly called monthly instalment.  Your monthly amortization is made up of principal plus interest payments paid regularly over a specified period of time.

To compute for your monthly amortization, there are some information or data you have to have on hand:

1.  Total Contract Price (TCP) of the property you are buying

2.  Loanable Amount.  Banks usually lend between 80% to 90% of the value of the property.

3.  Down Payment (DP) or Equity required by the developer.   Most developers usually require 20% down payment.  Minimum equity is usually calculated from the total contract price (TCP) less loanable amount

MINIMUM EQUITY = TOTAL CONTRACT PRICE – LOANABLE AMOUNT

4.  Interest Rate (IR).  This is dictated by the institution that will finance your loan – Pag-IBIG, bank or developer for in-house financing.

5.   Factor Rate which you can get from the following Factor Rate Table

 Term (years) 11.00% 11.25% 11.50% 1 0.0883816585 0.0884983137 0.0886150539 2 0.0466078382 0.0467239917 0.0468403153 3 0.0327387171 0.0328572349 0.0329760064 4 0.0258455226 0.0259670980 0.0260890089 5 0.0217424231 0.0218673079 0.0219926074 6 0.0190340790 0.0191623721 0.0192911562 7 0.0171224364 0.0172541668 0.0173864608 8 0.0157084257 0.0158435836 0.0159793738 9 0.0146258610 0.0147644123 0.0149036603 10 0.0137750011 0.0139168947 0.0140595444

To illustrate

Let us assume you want to buy a condo unit with a total contract price of P2,500,000.00 through bank financing.

Number of years to pay : 10 years

Interest Rate : 11.25%

Loanable Amount : P2,000,000.00

Down Payment : P500,000.00

Factor Rate : 0.0139168947 (10 years, 11.25%)

Monthly Amortization = Loanable Amount X Factor Rate

= P2,000,000 X 0.0139168947

Monthly Amortization = P   27,833.79 per month for 10 years

There you have it.  It’s quite simple to derive your monthly amortization once you have all the data on hand.

Or you can always use the Loan Amortization Calculator which you can find at the right hand side of this page.   To use the Loan Amortization Calculator, just enter the following information:

Loan Amount

Interest Rate

Term (number of years to pay)

First Payment Date

And press “CALCULATE”

And you get your monthly amortization.

Looking to buy a house or condo unit?
Or do you have property that you want to sell?