11+mortgages

Principal Interest and Term

Principal, interest rate, and term together determine a mortgage payment, and changing any one changes the payment and the total cost. A larger deposit, a lower rate, or a shorter term each reduce what is paid — and all three should be modelled before committing.

In this lesson

Principal Interest and Term is part of Understanding Home Financing. This preview shows how mortgages connects to everyday family decisions such as earning, saving, spending choices, goals, approvals, or parent-guided money conversations inside Progress Penguin.

Today’s money mission

Bola is considering a home loan of 15000000 in local currency over 20 years at 18% per year. She asks her bank for the monthly payment. Why are three variables — amount, rate, and term — all needed to calculate it?

How it works

A mortgage payment is determined by three variables: the loan principal (the amount borrowed), the interest rate (the annual cost of borrowing), and the loan term (the number of years to repay). Changing any one of these three variables changes the monthly payment significantly. A smaller principal, a lower rate, or a shorter term all reduce the payment — but only knowing all three allows an accurate calculation.

Apply it to a real decision

Real-life money moment: Bola is considering a home loan of 15000000 in local currency at 18% per year over 20 years. Her bank gives her the monthly payment: approximately 234000 in local currency. She does not understand why. Her adviser explains: the interest at 18% on 15000000 in local currency over 20 years is substantial. If she could reduce the loan to 12000000 in local currency (larger deposit), the monthly payment would fall to approximately 187000 in local currency. Same rate, same term — but a smaller principal produces a meaningfully different payment.

Activity preview

Connect the ideas

Use the lesson to complete this short practice activity.

Try one real money action

Open Tasks and submit proof for one task, or open Requests and make a deposit request. Parent approval can happen later.

Quiz preview

Principal, interest, and term in home financing mean:

The deposit paid, the monthly payment amount, and the property value

The government subsidy, the mortgage fee, and the occupancy agreement

The purchase price, the agent's commission, and the registration period

The amount borrowed, the cost of borrowing it, and the repayment period

You borrow 20000000 in local currency at 18% annual interest over 15 years. Understanding all three numbers helps you:

Determine only your monthly payment amount — the other numbers are administrative

Calculate your total repayment and true cost of homeownership over 15 years

Confirm the property's market value will exceed the total repayment after 15 years

Negotiate each of the three numbers separately with different institutions