China Housing Mortgage Calculator Guide 2026
Taking out a mortgage is one of the biggest financial decisions most people make in their lifetime. Equal Payment (annuity) and Equal Principal are the two most common repayment methods, yet many homebuyers are not clear about their differences and respective pros and cons. This article explains the mortgage calculation principles in detail and uses real-world examples to help you choose the repayment method that suits you best.
1. Basic Concepts of the Two Repayment Methods
1. Equal Payment (Annuity)
Equal Payment (annuity) means the monthly payment amount stays fixed, with the principal portion increasing and the interest portion decreasing month by month. In the early period, interest accounts for a larger share; in the later period, principal does.
✅ Pros
- Fixed monthly payment makes it easy to plan household finances
- Suitable for young people with stable income
⚠️ Cons
- Higher total interest paid
- Less principal repaid early, so capital is tied up longer
2. Equal Principal
Equal Principal means the principal repaid each month is fixed, while interest decreases month by month, so the total monthly payment also decreases over time.
✅ Pros
- Lower total interest paid
- Principal is repaid faster, and financial pressure eases over time
⚠️ Cons
- Heavier monthly payment pressure in the early years
- Requires strong cash flow in the initial period
2. Real-World Comparison Example
Suppose a loan of ¥1,000,000 with a 30-year term and an annual rate of 4.2%:
| Comparison Item | Equal Payment (Annuity) | Equal Principal |
|---|---|---|
| First-month payment | ¥4,890 | ¥6,944 |
| Last-month payment | ¥4,890 | ¥2,785 |
| Payment pattern | Fixed | Decreasing monthly |
| Total interest | ¥760,368 | ¥631,750 |
| Total repaid | ¥1,760,368 | ¥1,631,750 |
| Interest difference | Equal Principal saves about ¥128,618 | |
3. Detailed Calculation Formulas
Equal Payment (annuity) Monthly Payment Formula
Monthly payment = [Loan principal × Monthly rate × (1+Monthly rate)^Number of months] ÷ [(1+Monthly rate)^Number of months - 1]
Equal Principal Monthly Payment Formula
Monthly principal = Loan principal ÷ Number of months
Monthly interest = Remaining principal × Monthly rate
Monthly payment = Monthly principal + Monthly interest
👉 Use the free mortgage monthly payment calculator
4. How to Choose?
Choose Equal Payment (annuity) when:
- Salaried workers with stable income but limited savings
- Keeping monthly payment pressure manageable is the top priority
- People who may sell the home in the short term (within 5 years)
Choose Equal Principal when:
- You can afford a higher monthly payment at the start
- You plan to hold the property long term (10+ years)
- You have extra funds and want to reduce interest costs
5. Latest Mortgage Loan Rates for 2026
As of August 2026, the first-home loan rate at major domestic banks ranges from 3.8% to 4.5% (discounted from the LPR base). Second-home rates are typically 5%-10% higher.
6. Frequently Asked Questions
Q: Can I switch repayment methods mid-loan?
A: Most banks do not allow switching mid-loan. It is recommended to decide before signing the contract.
Q: Which method is better if I plan an early repayment?
A: If you plan an early repayment, Equal Payment (annuity) is recommended. With Equal Principal, more principal is repaid early, so the benefit of early repayment is less obvious.
Q: How to choose between a PF loan and a commercial loan?
A: PF loan rates are usually 1-2 percentage points lower than commercial loans, so use them first. If the PF loan limit is insufficient, a combined loan is an option.
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