Monthly amortization and total interest on a housing loan.
Monthly amortization
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Total interest
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Total repaid
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Worked example
Take a 3,000,000 peso bank housing loan at 7% a year over 20 years. The monthly rate is 7% divided by 12,
and the term is 240 months. Running the amortization formula gives a monthly payment of about 23,259 pesos.
Over the full 240 months you repay roughly 5,582,152, of which 3,000,000 is the principal you borrowed and
about 2,582,152 is interest. Interest here is nearly as large as the loan itself, which is the cost of
borrowing over two decades. Shortening the term to 15 years would raise the monthly payment but cut the
total interest sharply, while a Pag-IBIG loan stretched to 30 years would lower the monthly figure and push
total interest higher still.
Item
Amount (PHP)
Loan amount
₱3,000,000
Monthly amortization
₱23,259
Total interest
₱2,582,152
Total repaid
₱5,582,152
How it is calculated
The monthly amortization uses the standard annuity formula: the payment equals the principal times the
monthly rate, divided by one minus one plus the monthly rate raised to the negative number of months. The
monthly rate is the annual rate divided by twelve, and the number of months is the term in years times
twelve. Every payment is the same size, but early payments are mostly interest because the outstanding
balance is large, and later payments are mostly principal as the balance shrinks. Total repaid is the
monthly payment times the number of months, and total interest is that figure less the original loan.
Philippine bank housing loans usually carry a rate fixed for an initial period and then repriced, while
Pag-IBIG offers member rates that step up with loan size, so the rate you enter should match the tier and
stage of your own loan. The tool covers principal and interest only and excludes mortgage redemption
insurance, fire insurance, and processing fees.
Frequently asked questions
How is a home loan amortization computed in the Philippines?
The monthly amortization uses the standard formula, where the payment equals the principal times the monthly rate, divided by one minus one plus the monthly rate raised to the negative number of months. Bank housing loans in the Philippines often run 10 to 20 years, while Pag-IBIG loans can extend up to 30 years at member rates. A longer term lowers the monthly payment but raises the total interest paid.
What is the difference between a bank housing loan and a Pag-IBIG housing loan?
Bank housing loans are offered by commercial banks at rates that are usually fixed for an initial period of one to five years and then repriced. Pag-IBIG housing loans are funded by the Home Development Mutual Fund at rates that step up with the loan amount, and they are available only to active Pag-IBIG members with sufficient contributions. Pag-IBIG loans can stretch to 30 years and are generally accessible to lower-income borrowers, while bank loans may offer higher ceilings and faster processing for qualified borrowers.
How much does shortening the loan term save on total interest?
Shortening the term raises your monthly payment but sharply reduces total interest because the outstanding balance shrinks faster. On a PHP 3,000,000 loan at 7 percent, cutting the term from 20 years to 15 years raises the monthly payment from about PHP 23,259 to about PHP 26,967, but it saves roughly PHP 770,000 in total interest over the life of the loan. The trade-off is higher monthly cash flow pressure versus a lower lifetime cost of borrowing.
Does this calculator include mortgage insurance and processing fees?
No. The calculator covers principal and interest only, which is the amortization portion of your payment. Philippine housing loans also typically require mortgage redemption insurance and fire insurance, which protect the lender if the borrower dies or the property is damaged. Processing fees, appraisal costs, and documentary stamp tax add further one-time costs at the start. Check with your bank or Pag-IBIG for the full cost breakdown before committing to a loan.