Should I Buy or Rent? A mathematical guide to help you keep up with the Joneses
Principle to mortgage payment ratio
The division between your equity and the interest you pay the bank is based on several factors:
- amortization period
- interest rate (variable and fixed)
- term length
Currently you can get a variable interest rate mortgage at approximately 2%, and a fixed rate mortgage around 5%. At 2% you are effectively doubling your principle payment to your mortgage. The risk is that your mortgage payment will increase over time, while you principle contribution will diminish.