In the current society, the majority of the population has opted to borrow to purchase property, which can effectively relieve our financial pressures. However, when some of them apply for a mortgage, the problem is that the interest on the loan is almost higher than the principal amount. So, what's going on? Let's find out。

Why is the mortgage interest higher than the principal

First, let us understand that not all interest is calculated in the same way as “interest = principal* interest rate”. This calculation usually applies only to borrowings for a period of one year or less, and is mainly in the form of “first-in-first-in-first-in-time” or “one-time debt service due”. In general, however, the duration of the mortgage is 5 years, 10 years or even 30 years, i.e., long-term loans, which are repaid mainly in the form of “equal principal” or “equal principal interest”. Thus, as long as the duration of the loan is sufficient and the interest rate on the loan is higher, there is a risk that interest will be higher than principal。

So, if the mortgage rate drops, will our loan line be reduced? The answer is usually no. This is because most home buyers choose a loan at a fixed rate, which means that the interest rate on which the loan is based is the rate at the point of conversion, which is fixed until the loan expires and will not change. As a result, the monthly repayment by the purchaser will remain unchanged。

IF THE LPR-BASED PRICE IS SELECTED FOR THE LOAN, IT WILL HAVE TO WAIT UNTIL THE NEXT RE-PRICING DATE TO CALCULATE THE SPECIFIC IMPLEMENTATION RATE BASED ON THE CORRESPONDING LPR PERIOD OF THE LATEST ISSUE AND THEREAFTER. THEREFORE, THE INTEREST RATE WILL BE REDUCED DEPENDING ON WHETHER THE LATEST LPR RATE ON THE DATE OF REPRICING HAS BEEN LOWERED。