Re: Question on house loan
Posted: Wed Jun 19, 2019 6:08 am
Adding to what RetireJapan is explaining:
Let's imagine that you have a floating rate loan and you pay back JPY100,000/month including both principal (50,000jpy) and interests (50,000jpy).
If the interest rates suddenly surge the 25% rule only guarantees you that your maximum monthly payment will be capped at 125,000Jpy/month.
So your are now paying 125,000Jpy/month, but it says nothing about how much of that is principal repayment and how much are interests. If the rates surged like crazy you might now be paying 100,000Jpy/month of interests and only 25,000Jpy/month of principal.
This means that if you don't increase voluntarily increase your monthly payments it is going to take you much longer to repay your loan.
Let's imagine that you have a floating rate loan and you pay back JPY100,000/month including both principal (50,000jpy) and interests (50,000jpy).
If the interest rates suddenly surge the 25% rule only guarantees you that your maximum monthly payment will be capped at 125,000Jpy/month.
So your are now paying 125,000Jpy/month, but it says nothing about how much of that is principal repayment and how much are interests. If the rates surged like crazy you might now be paying 100,000Jpy/month of interests and only 25,000Jpy/month of principal.
This means that if you don't increase voluntarily increase your monthly payments it is going to take you much longer to repay your loan.