How the repayment methods differ
Equal payment (annuity)
You pay the same total of principal and interest every month. Early on most of it is interest, and the principal share grows over time. Because the monthly outflow is fixed, it is easy to budget around, which is why it is the most common method for Korean mortgages.
r = monthly rate (annual rate ÷ 12), n = number of monthly payments
Equal principal
You repay the principal in equal monthly slices and pay interest only on the remaining balance. The first month is the heaviest and payments shrink over time. Because the principal falls faster, total interest is lower than with equal payment.
Bullet repayment
You pay only interest during the term and repay the whole principal at maturity. The monthly burden is the lowest, but the principal never shrinks, so total interest is the highest. It is mostly used for credit loans and jeonse deposit loans in Korea.
Example: borrowing ₩100 million at 4.5% for 30 years
| Repayment method | First month’s payment | Total interest |
|---|---|---|
| Equal payment | ₩506,685 | ₩82,406,712 |
| Equal principal | ₩652,778 | ₩67,687,500 |
| Bullet | ₩375,000 | ₩135,000,000 |
Borrowing the same amount at the same rate, equal principal costs about ₩14.7 million less in total interest than equal payment, but you pay about ₩146,000 more in the first month. Bullet repayment has the smallest monthly burden, but because the principal stays for 30 years, total interest exceeds the principal.
Monthly payment by rate and term (₩100 million loan, equal payment)
| Rate | 10 years | 20 years | 30 years | 30-year total interest |
|---|---|---|---|---|
| 3% a year | ₩965,607 | ₩554,598 | ₩421,604 | ₩51,777,452 |
| 3.5% a year | ₩988,859 | ₩579,960 | ₩449,045 | ₩61,656,088 |
| 4% a year | ₩1,012,451 | ₩605,980 | ₩477,415 | ₩71,869,506 |
| 4.5% a year | ₩1,036,384 | ₩632,649 | ₩506,685 | ₩82,406,712 |
| 5% a year | ₩1,060,655 | ₩659,956 | ₩536,822 | ₩93,255,784 |
| 5.5% a year | ₩1,085,263 | ₩687,887 | ₩567,789 | ₩104,404,040 |
| 6% a year | ₩1,110,205 | ₩716,431 | ₩599,551 | ₩115,838,189 |
For a ₩200 million loan, multiply the amounts by 2; for ₩50 million, by 0.5. A difference of just 0.5 percentage points in the rate changes 30-year total interest by around ₩10 million. When comparing loans, look at the rate and total interest before the monthly payment.
Which method should you choose?
- To minimize total interest, equal principal is better — as long as you can handle the early burden.
- To plan around a fixed monthly amount, equal payment is easier.
- If you will use the money briefly and repay soon, bullet repayment can work. Be sure to check prepayment fees.
Frequently asked questions
What changes with a grace period?
During the grace period you pay only interest, not principal. The early burden is lower, but because you repay principal later, total interest rises and monthly payments are larger after the grace period ends.
My bank app shows a slightly different result.
Banks often calculate interest on actual days (30 or 31) or pro-rate the first month’s interest from the loan date. This calculator uses the same rate every month, so results can differ by hundreds to thousands of won.
Want to understand prepayment fees and DSR too?
Read the loan repayment guide