Duration and types of instalment

When choosing a mortgage one must pay particular attention to a number of aspects, starting with the duration of the mortgage, i.e. the time allowed to pay back the capital borrowed and the interest thereon. The loan term can be seen from the amortisation schedule, i.e. the detailed plan for repayment of the loan calculated instalment by instalment.

The longer repayment plans, which allow for individual instalments of a smaller amount, also correspond to a higher amount of interest paid to the bank to offset the greater risk it runs.

In choosing the mortgage term you should therefore consider primarily your ability to repay, it being always necessary to plan one’s investments carefully, according to one’s needs and current and foreseeable economic capacity.

The most common repayment plan is the so-called “French” one which provides for the reimbursement of interest on the diminishing balance: you start by paying instalments consisting primarily of interest and in small part of capital, while later on the instalments are made up of a greater share of capital and a lower share of interest.

If you choose a fixed-rate mortgage, the repayment plan will not vary during the term of the loan, while in the case of a variable-rate mortgage the relevant repayment plan may be subject to variations due to fluctuations in interest rates.

You can choose the frequency of repayment instalments which can be monthly, quarterly, half-yearly, and so on.