Loan Payment Formula and Cost Analysis
The Monthly Payment Formula
The fixed-rate loan monthly payment is calculated as:
M = C x (r / (1 - (1 + r)^(-n)))
Where C = loan amount, r = monthly rate (annual rate / 12), n = total months
Example: 200,000 EUR at 3.5% Over 20 Years
- Loan amount: 200,000 EUR
- Monthly rate: 3.5% / 12 = 0.2917%
- Total months: 240
- Monthly payment: approximately 1,160 EUR
- Total repaid: 278,400 EUR
- Interest cost: 78,400 EUR
How Rate Changes Affect Total Cost
A 1-point rate increase on à 200,000 EUR loan over 20 years adds over 20,000 EUR in total interest. Negotiating even 0.2 to 0.3 percentage points lower can save thousands of euros over the life of the loan. Always compare offers from multiple lenders.