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Yangcheng Evening News reporter Huang Yinglin

"The pressure of monthly payments in the early stage is reduced by nearly half" and "the remaining principal will be repaid in one lump sum in the later stage"... Recently, some banking institutions have launched new mortgage products such as "balloon loans" and "easy payments", which have attracted widespread attention and discussion. Different from the current common equal principal and interest and equal principal repayment methods, this type of product uses interest first and principal later, and the initial repayment amount is relatively low, providing a new choice for mortgage holders. In the long run, is this new repayment method really cost-effective? Which group is more suitable? What matters should be paid attention to?

A "balloon loan" is a small loan at the beginning and a large one later. Pay the interest first in the first few years.

"Balloon loan" is actually a repayment model of interest first and principal later. It is named because the repayment amount is "small at first and large at the end", which is similar to the process of inflating a balloon.

According to the official WeChat account of Ping An Bank, "balloon loan" means that the borrower calculates the monthly payment according to the agreed total number of installments (fixed for 20 years), repays the loan principal and interest in installments during the loan period, and repays the remaining principal in one lump sum in the last installment. It is worth noting that the relevant promotional articles on the bank's official WeChat account have been removed.

Yangcheng Evening News reporter found that most banks that can handle the above business currently adopt a mortgage repayment combination of interest first and principal later, and equal principal and interest or equal principal in the later period. For example, China Construction Bank's "easy payment" business divides the mortgage into two stages within the loan period: in the first stage, the principal of 1 yuan and the loan interest to be repaid in that month are repaid monthly; in the second stage, within the remaining loan period, the remaining loan principal can be repaid in the conventional equal principal or equal principal and interest method.

An account manager of a Guangzhou branch of Industrial Bank told reporters that the bank's "pay as you pay" personal loan feature product allows medium- and long-term personal mortgage customers to apply for a certain period of time (up to three years) without repaying the principal, and only repay the loan interest on schedule, and repay the loan principal and interest on schedule after the agreed period expires. "This is equivalent to reducing the pressure of periodic repayments and releasing considerable cash flow. It is more suitable for young white-collar workers who have just entered the workplace, as well as people who are facing marriage, children's schooling or other periodic financial pressures."

The total interest may increase, testing the ability to repay the loan later

Is it really as cost-effective as imagined to pay interest first and principal later? Taking a loan of RMB 1 million, a term of 30 years (360 installments), and an interest rate of 3.20% as an example, a banking insider did the math for the reporter:

According to the equal principal and interest payment, the same amount of loan (principal + interest) is repaid every month, with a monthly payment of about 4,324.67 yuan. The more time passes, the more principal is paid and the less interest is paid. The final total repayment amount is 1.5569 million yuan, and the accumulated interest paid is 556,900 yuan.

According to the equal principal repayment, the same amount of principal and interest generated by the remaining loan in that month were repaid each month. The first monthly payment was about 5,444.44 yuan, and the principal remained unchanged and the interest gradually decreased. The final total repayment amount reached 1.4813 million yuan, and the accumulated interest paid was 481,300 yuan.

According to the new repayment model, only interest is paid in the first three years. During this repayment period, the monthly payment is about 2,666.67 yuan, which is nearly half of the amount, and the accumulated interest paid is 96,000 yuan. In the following 27 years, if the equal principal and interest are used, the monthly payment is 4,613.27 yuan, and the total interest is 494,700 yuan; if the equal principal is used, the monthly payment in the first month is 5,753.09 yuan, and then it decreases every month, and the total interest is 433,300 yuan. In this way, the total accumulated interest paid is between 529,300 yuan and 590,700 yuan.

In this regard, some "mortgage holders" believe that paying interest first and principal later is equivalent to lowering the threshold for buying a house in disguise and alleviating short-term repayment pressure. At the same time, many people also have doubts. Although this model seems to have less pressure on monthly payments in the initial stage, the actual total amount of interest paid may be more, which obviously increases the subsequent repayment pressure.

Industry insiders told reporters that different products have their own advantages and disadvantages. New products such as "balloon loans" and "easy supply" test borrowers' judgment and risk management capabilities on future income expectations. If the borrower's income growth does not meet expectations, large repayments in the later period may have a negative impact on their financial situation and even lead to loan defaults. In comparison, traditional products such as equal principal and interest and equal principal repayments have higher repayment amounts in the early stage, but the expenditure expectations are clearer and more stable.

As for who is more suitable, Dong Ximiao, chief researcher of China UnionPay, believes that this new repayment method is mainly aimed at two types of customers. "One is the new citizens who have low income in the short term and are under great pressure to repay the loan; the other is young people who have not worked for a long time but are expected to have an increase in income in the future. The lower initial repayment pressure and flexible repayment methods can help alleviate the short-term repayment pressure and balance income and expenditure over a longer period of time."

Dong Ximiao specially reminded that borrowers should reasonably assess their repayment ability based on personal and family needs, apply for personal housing loans rationally, and choose a repayment method that suits them.