French vs German Amortization: Which System Saves You More?

Understanding how your loan is calculated can save you thousands over the life of your mortgage.

French System (Constant Payment)

• How it works: You pay the same amount every month.
• Composition: Initially mostly interest, slowly shifting to principal.
• Pros: Predictability, lower initial payments.
• Cons: Higher total interest cost.

German System (Constant Principal)

• How it works: You pay a fixed amount of principal + interest on the remaining balance.
• Composition: Payments start high and decrease every month.
• Pros: Lower total interest cost, debt reduces faster.
• Cons: Higher initial burden.

Which is better?

If you can afford the higher initial payments, the German System is mathematically superior for savings. However, the French System is often preferred for budgeting stability.

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