Before we talk mortgages, one question: walk into a bank for a home loan and the officer will almost certainly hand you two repayment methods — equal installment and equal principal. This guide focuses on equal installment, because it is what most people end up choosing.
1. What equal installment actually means
Equal installment means exactly what it says: the same total amount leaves your account every month. Borrow for 10 years or 30, the payment in month one and the payment in the final month are identical.
That fixed figure is not arbitrary. It is set so that over the full term, principal plus all the interest is spread evenly across every month, making each payment exactly equal. Which means the split between interest and principal inside each payment shifts constantly: interest dominates at the start with only a sliver of principal; later on, interest shrinks and principal takes over.
Let us put a number on that feeling. Same terms — ¥1,000,000, 30 years, 4.9%, payment ¥5,307:
There it is in black and white: after five years you have handed over ¥318,436, of which ¥235,413 was interest — your principal fell by just ¥83,023. That is the most counter-intuitive part of equal installment.
2. The numbers: what ¥1,000,000 over 30 years really costs
Concepts are cheap. Let us run the case. Say Alex borrows ¥1,000,000 to buy a home, over 30 years — 360 payments — at 4.9% a year, which is a monthly rate of about 0.4083%.
The equal installment formula:
Plug the numbers in and the payment comes out at about ¥5,307. Note what that means: month one is ¥5,307, month 360 is ¥5,307. Not a cent more, not a cent less, for all 360 payments.
Read that again: borrow ¥1,000,000 and the interest alone comes to roughly ¥910,616 — nearly as much as the loan itself. That is the price of equal installment: more interest overall, in exchange for a payment you can plan around.
3. How it compares with equal principal
So what about equal principal? It splits the ¥1,000,000 evenly across 360 months — a fixed ¥2,777.78 of principal each month — with interest calculated separately on the remaining balance, so it falls month by month. The first payment is therefore the largest, about ¥6,861, and it drops by roughly ¥11.34 every month after that. Total interest over 30 years comes to about ¥737,042, saving roughly ¥173,575 versus equal installment.
| Item | Equal installment | Equal principal |
|---|---|---|
| Monthly payment | Fixed at ¥5,307 | ¥6,861 at first, falling ¥11.34/month |
| Total over 30 years | ¥1,910,616 | ¥1,737,042 |
| Total interest | ¥910,616 | ¥737,042 |
| Early-term pressure | Low — same payment throughout | High — ¥1,554 more in month one |
| Best for | Stable-income salaried borrowers | Comfortable cash flow, wants less interest |
At this point you might think equal principal is the obvious pick — it saves ¥173,575. Not so fast. Equal principal front-loads the burden: the very first payment is ¥1,554 higher, which hurts if cash is tight or your income is only getting started. Banks know this too, which is why equal installment is the mainstream choice — a fixed payment is easy to budget around and suits borrowers with steady income.
4. So which one should you pick?
The short version:
- Stable income and want peace of mind → equal installment. The payment never moves; you pay more interest for that certainty.
- Comfortable cash flow and want to minimise interest → equal principal, provided you can carry the heavier early payments.
- Planning to repay early → equal principal clears principal faster, so early repayment works better there; equal installment suits the "pay it slowly and stop fussing" approach.
Finally, every figure above is something you can reproduce yourself: drop your loan amount, rate and term into the General Loan Calculator, switch the repayment method, and you will see the payment, total interest and the full schedule — no guesswork required.