Amortization Systems: French vs. German
The choice of amortization system defines how you will return the money to the bank. The most common in Spain are:
- 🇫🇷 French System (Constant Fee)
You will pay the same fee every month. At the beginning, most of the fee goes to paying interest. As the years go by, this proportion changes and you amortize more capital. It is the most used for its predictability.
- 🇩🇪 German System (Constant Capital)
The part of the fee that is destined to return the capital is always the same. As the outstanding capital decreases, the interest does too, so the monthly fee is decreasing. You will pay less interest in total than with the French system.
The Key Strategy: Early Amortization
Making extra payments on your mortgage is one of the smartest financial decisions. When doing so, you have two options:
1. Reduce the Term
You keep the same monthly fee but finish paying the mortgage earlier. This option is usually the one that saves you the most interest in the long run. Ideal if your goal is to clear the debt as soon as possible.
2. Reduce the Fee
You keep the original term but your monthly payments are reduced. This option gives you more economic leeway in your day to day. Ideal if you are looking to improve your monthly cash flow.
Our calculator allows you to simulate both scenarios so you can see the real impact of each prepayment and make the best decision.
Frequently Asked Questions (FAQ)
Financially, reducing the term usually saves more interest in the long run. Reducing the payment, on the other hand, provides more monthly liquidity. The best option depends on your situation and financial goals.
Yes, banks may charge fees for early repayment, but with certain limits. You should check the specific conditions of your mortgage contract to know the details.
Our calculator automatically generates a detailed amortization schedule. You just need to enter the amount, interest, and term of the loan. The table will show you the breakdown of each payment into capital and interest throughout the life of the mortgage.
Yes, any early repayment, no matter how small, reduces the total interest you will pay. Use our tool to simulate exactly how much you would save by prepaying 1000 or any other amount, whether by reducing the final payment or the loan term.