Written and professionally reviewed by the Ailon Financing Solutions team
The difference is in one sentence
Spitzer gives a lower and more stable starting fee. An equal fund repays the debt faster and saves interest, but requires the ability to withstand higher payments at the beginning.
An example of a million shekels
We will examine a loan of one million shekels for 25 years at an annual interest rate of 4.8%, without linkage:
| given | Spitzer | equal fund |
|---|---|---|
| Estimated first payment | NIS 5,730 | NIS 7,333 |
| the manner of change | constant | Decreasing monthly |
| The rate of fund decline | Slow at first | Faster than the first month |
| total interest | higher | lower |
The numbers are for illustration purposes. You can enter your data inThe mortgage calculator and see a full monthly schedule.
How does a Spitzer plate work?
The bank calculates a basic payment equal to all the months of the loan. At the beginning of the period, the principal balance is high and therefore the interest component is large. As the balance decreases, the interest component decreases and the principal component increases.
The advantage is a more predictable and convenient flow. The downside is that the fund depreciates slowly in the first few years, so recycling or early selling may reveal a higher balance than expected.
How does an equal fund work?
The principal amount is divided by the number of months of the loan. Every month, the same part of the fund is returned, and the interest is calculated on the remaining balance. As the balance goes down, so does the interest and total payment.
The method is suitable for those who can afford a high repayment at the beginning and want to quickly reduce the debt and the accumulated interest.
What happens when there is a link to the index
Pinning changes both methods. The balance of the fund and the payment are updated according to the index, therefore even a payment that seems fixed in basic terms may increase in shekels.
Ailon's calculator allows you to enter an annual index assumption and see separately the interest rate and the cost of linking in the scenario.
How to choose between the methods
- If the certainty of the monthly payment is the main consideration, Spitzer is usually more convenient.
- If current income is high and expected to remain stable, an equal fund may save interest.
- If a large change in income, sale of property or early repayment is expected, the expected balance at this point in time should also be examined.
- The choice does not have to apply to the entire mortgage. It is possible to combine methods and routes within one mix.
The bottom line
There is no absolutely good board. A correct schedule is the one that balances total cost, the rate of debt reduction and the repayment ability of the household even in a less favorable scenario.
Compare scenarios in numbers
Build a disposal board bThe mortgage calculator and compare alternatives bMortgage comparison calculator. Monthly payment, balance and total cost must be checked throughout the same period and under the same conditions.
