Insights
Insights for smarter expense management
Practical tips, user stories, and financial strategies that help you track expenses, organize your finances, and make better spending decisions.
Insights
Practical tips, user stories, and financial strategies that help you track expenses, organize your finances, and make better spending decisions.
Example: €300,000 Mortgage Calculation
A detailed breakdown of costs, interest, amortization, and real long-term impact
A €300,000 mortgage is a common benchmark for first-time buyers in many European countries. Yet despite the familiarity of this number, very few households truly understand how much they will pay over time, how interest is calculated, or how small changes in interest rates dramatically alter long-term costs. This article breaks the loan down step by step, revealing what buyers are really paying for their homes.
For this example, imagine the following mortgage:
These assumptions reflect a typical modern European mortgage, although interest rates vary by country and economic climate.
Most mortgages today use a fixed monthly payment formula:
Where:
When we plug in the numbers, the monthly payment becomes:
This amount remains constant for 30 years—but the composition of each payment changes dramatically over time.
In the early years of the mortgage, the majority of your monthly payment goes to interest, not the home itself.
Only €432 actually reduces your loan balance.
At the end of the first year, you will have paid:
Only 31% of your payment goes toward the house—69% goes to the bank.
This surprises many first-time buyers who assume their payment is split 50/50.
Because interest is calculated on the remaining loan balance, early-year payments barely reduce the principal. Over time, as the balance shrinks, the interest share gradually falls.
Loan balance after 10 years: ~€239,000
Interest paid in year 10: ~€8,900
Principal paid in year 10: ~€8,284
The balance between interest and principal has finally begun to even out.
Over 30 years, you will pay:
The interest is 71% of the original price of the home loan.
This means:
A €300,000 loan actually costs over €515,000
—even with just a moderate interest rate of 4%.
This is why financing costs are one of the biggest expenses a household faces.
Small changes in interest rates have enormous long-term consequences.
You save €60,120 in interest over 30 years.
You pay €64,080 more than in the 4% scenario.
That is €192,240 more interest than at 3%.
This demonstrates how sensitive mortgages are to rate changes—and why timing matters.
Let’s look at what you actually own after several milestones:
This pattern is why mortgage early repayment strategies can be extremely effective.
A small overpayment—even €100/month—has big impact.
This happens because every extra euro goes directly to the principal, reducing how much interest is calculated in the future.
Let’s compare monthly household budgets in three scenarios:
This is why households feel squeezed when rates rise—even small increases dramatically change their monthly reality.
Several cognitive biases distort how consumers perceive mortgages:
People focus on the monthly payment, not the total cost.
€1,432/month “feels small,” while €515,000 total does not.
Borrowers assume their future income will increase.
Interest is hidden inside the monthly payment, making it emotionally invisible.
For these reasons, many households underestimate the true price of home ownership.
The €300,000 mortgage illustrates key financial truths:
A mortgage is not just a loan—it’s a long-term behavioral and psychological commitment.
The more clearly households understand the structure, the better equipped they are to avoid financial stress and make informed decisions.
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