01
The three inputs behind the payment
Principal is the amount actually borrowed, not the full property price. The formula uses the nominal rate converted to the payment period.
The number of payments is years multiplied by payments per year: 25 years with monthly payments means 300 instalments.
- Amount borrowed
- Nominal rate and payment frequency
- Full repayment term
02
Nominal rate, APR and fees
The nominal rate drives the interest calculation. APR is more useful for comparing offers because it includes many compulsory charges, but it is not the rate entered in the payment formula.
Valuation, arrangement, insurance, tax and legal fees may materially change upfront and total cost.
- Compare the same amount and term
- Check which charges are included in APR
- Request the full amortisation schedule
03
Term, interest and affordability
With level payments, interest is highest near the start because the outstanding balance is larger. The principal share rises over time.
Test several terms and preserve room in the household budget for unexpected costs and income changes.
Worked example
€180,000 at 3.5% for 25 years
- Principal
- €180,000
- Nominal rate
- 3.5% a year
- Term
- 300 monthly payments
Total scheduled payments are roughly €270,300 before fees excluded from the formula.
Common mistakes to avoid
- Entering APR as the nominal rate
- Comparing payments with different terms but ignoring total cost
- Omitting upfront fees and insurance
- Using the whole monthly surplus with no safety margin
Frequently asked questions
Is a longer mortgage term better?+
It lowers the payment but generally increases total interest. Compare both figures.
Will the bank quote exactly this payment?+
Not necessarily. Fees, start date, rounding and contract terms can change the final figure.
Does the formula work for a variable rate?+
It can illustrate one payment at one rate, but it cannot predict future rate changes.
Sources and references
Banca d’Italia · Mortgage payment calculator↗Banca d’Italia · Mortgage guide↗