Amortisation is the process of paying down a loan through regular instalments, where each payment covers the interest due for the period and repays part of the outstanding principal.
Key takeaways
- Each monthly instalment on a home loan is made up of a principal repayment and an interest payment.
- Singapore home loans are commonly charged on a monthly rest basis, so interest is calculated on the reducing outstanding balance rather than the original loan amount.
- The instalment amount usually stays level while the split shifts: the interest portion falls and the principal portion rises over the tenure.
- For the same amount borrowed, a longer tenure means a smaller monthly instalment but more total interest paid.
- A repayment schedule from the lender sets out the instalment, the split and the total borrowing cost across the tenure.
See how this applies to your own figures.
Singapore Mortgage Calculator →How an amortising instalment is split
On a monthly rest loan, interest for each month is worked out on the balance still outstanding. The rest of the level instalment reduces the principal. Because the balance falls every month, the interest charge falls with it and a larger slice of the same instalment goes to principal.
A worked amortisation schedule
MoneySense illustrates a loan of SGD 600,000 repayable over 20 years at a fixed rate of 3.5% p.a., met by 240 equal monthly repayments of SGD 3,480. In year one, SGD 1,729.76 of each instalment repays principal and SGD 1,750 is interest. By year five the same SGD 3,480 instalment repays SGD 1,989.29 of principal and only SGD 1,490.47 of interest. The yearly repayment is SGD 41,757 throughout.
Amortisation and flat-rate loans
Not every loan amortises this way. Under a flat rate, interest is calculated on the original loan amount for the whole tenure, so the monthly interest does not fall as the balance is paid down. That is why the Effective Interest Rate on a flat-rate loan is higher than its advertised rate, while on a monthly rest loan the advertised rate and the EIR are the same.
What changes the amortisation profile
- Loan tenure — a longer tenure spreads principal repayment out and raises total interest
- Interest rate — a rate change on a floating package resets the interest portion of each instalment
- Partial prepayment — a lump sum reduces the outstanding balance and reshapes the remaining schedule
- Refinancing or repricing — a new rate or tenure restarts the schedule on the outstanding balance
Key amortisation figures
| Item | Figure |
|---|---|
| Interest basis commonly used for home loans | monthly rest (reducing balance) |
| MoneySense illustration — loan, tenure and rate | SGD 600,000 over 20 years at 3.5% p.a. |
| Equal monthly repayment in that illustration | SGD 3,480 over 240 months |
| Year 1 split — principal / interest | SGD 1,729.76 / SGD 1,750 |
| Year 5 split — principal / interest | SGD 1,989.29 / SGD 1,490.47 |
Figures as at 2026. Source: MoneySense.
Worked example
On the MoneySense illustration of an SGD 600,000 loan over 20 years at 3.5% p.a. on monthly rest, the instalment is a level SGD 3,480 a month. In year one that instalment is SGD 1,729.76 of principal and SGD 1,750 of interest; by year five it is SGD 1,989.29 of principal and SGD 1,490.47 of interest. The payment has not moved, but the mix has.
Related terms
All Singapore glossary terms →Related calculator
Work out the monthly instalment and the principal-and-interest split across a home loan tenure.
This page is provided for educational and informational purposes only. It does not constitute financial advice. All figures and worked examples are estimates for illustrative purposes, are subject to change, and do not reflect any individual’s circumstances. Always refer to MoneySense and seek independent professional advice before making any financial decisions.