How To Compute the monthly amortization of Your Housing Loan?
Did you mind asking yourself how is your monthly amortization being computed? Whether it is for a housing loan, car loan or other forms of loans, the manner on how it is being computed is the same. There is a so called factor rate that when multiplied to the loan amount, you will get the monthly amortization. Of course, any insurance are not yet included here.
To fully understand on how it is being computed, here is an illustration. We will consider here a factor rate from a Pag-IBIG interest rates as basis of our computation.
Actually, this factor rate has been derived from this formula but you don't need to know to have a deep understanding on how it is being computed by this formula, as I've illustrated the simplest computation below.
Let us assume the following conditions for a house and lot:
Contract Price - P1,000,000
Downpayment - 100,000
Net Contract Price - P900,000
Interest rates - 6.5% 3 years interest fixing
Note: Interest fixing is a process whereby the interest rate is being assessed after a certain period. In this case, it's a 3 years fixing
Factor rate at 6.5% interest rates - 0.00632
Loan Term - 30 Years
Given the data, the loanable amount is P900,000. Here's the computation of the monthly amortization (Principal + Interest only ).
Loanable Amount - P900,000
Multiplied by Factor rate - 0.00632
Monthly Amortization - P 5,688
Please note that the monthly amortization does not include yet the Mortgage Redemption Insurance (MRI), Fire Insurance and an upgrade to the Pag-IBIG monthly contribution depending on the loan amount.
For MRI, it is computed by dividing the Loan Value by 1000 then multiplying it by 0.23. For Fire Insurance, it is the Loan Value divided by 1000 multiplied by 0.42. In this case, let us compute for it.
MRI P900,000/1000 * .023 = P207
FI P 900,000/1000*.42 = P378
Total Insurance = P585
Contribution Upgrade is the additional required monthly contribution that you need to add based on the loan value that you have borrowed.
For a P900,000, the required contribution is P350, so if you are paying monthly contribution in PagIBIG of P200, then you need to add P150 to your contribution.
So, to add up the total value of your monthly amortization, here it is:
Principal and Interest : P5,688
MRI/FI : P585
Upgrade : P150
Total Monthly amortization: P6,423
Please take note that this is only an estimate computation for us to have an idea on how our monthly amortization is being computed. The computation herein presented may differ on the actual computations provided by either Pag-IBIG or other Financial Institution.
Thank you very much for reading this article. I hope you have learned some insights here.
Have a great day ahead...
Regards,
Ralf Roger Tagao
Certified Public Accountant
Licensed Real Estate Broker
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