Mortgage Floating Interest | Definition, Advantages and Disadvantages

Calculation of floating interest rates is something you need to know, especially before buying a house with a Home Ownership Credit scheme (mortgage).

Home ownership loans are an alternative in meeting the need for housing.

Public interest in taking home ownership on credit is also quite high.

Naturally, because buy a house through the mortgage scheme is not too burdensome financially.

It is enough to prepare funds for a down payment and other costs for legal and administrative purposes, you can already get your dream home.

Even so, you should not neglect to consider the payment mechanism, especially regarding the interest applied.

The mortgage payment mechanism usually applies a floating interest rate.

Well, you need to know how to calculate it to avoid the risk of bad credit.

When this happens, of course, it can be fatal. One of your houses can be confiscated by the bank because you continue to be in arrears in installments.

There are many experiences that tell of this not wearing it.

So, so that you can better understand floating problems, we will present a review in this article.

What is a Floating Interest Rate?

Floating interest is volatile, meaning it can increase or decrease. Therefore, it is often referred to as a floating flower.

Changes in the value of floating interest rates refer to Bank Indonesia (BI) interest rates, market interest rates, or the policies of lending banks.

Value change mortgage interest rate affect the amount of installments paid.

This means that the value of the house installments that you have to pay per month, can increase or decrease from before.

For example, you apply for a mortgage with 10 percent interest in the initial two years, with an installment value of IDR 1 million per month.

However, because the interest rate increased to 13 percent, in the third year your installment amount increased to IDR 1.3 million.

You can get information regarding this interest rate through the official website of each bank.

BI itself does require all banks to display their credit reference interest rates.

Floating Interest Calculation Scheme

Floating Interest Calculation Scheme

There are two floating calculation schemes, namely effective and annuity.

An effective scheme is a scheme that applies calculations based on loan balances and interest rates mortgage interest.

The annuity is a calculation method based on the number of principal installments with interest installments, which are paid simultaneously every month.

Regarding the formula and how to calculate it, see the following description:

The interest rate formula is; Loan Principal Balance (SP) x Annual Interest Rate (i) : 12 (number of months in a year).

The simulation, you want to do mortgage application for Rp. 500 million with a tenor of 10 years.

The interest rate charged is in the form of floating at 10 percent, with an installment period of 1-3 years. Then it rises to 12 percent in the fourth year onwards.

Then the amount of installments you have to pay for the first three years, is IDR 4,166,666. By counting; IDR 500,000,000 x 10% x 3: 36 = IDR 4,166,666.

Entering the fourth year, the installment amount will increase to IDR 5 million due to a two percent increase in interest rates.

The following is the calculation of the installment amount in the fourth year after the increase; IDR 500,000,000 x 12% x 3: 36 = IDR 5,000,000.

You can also use the features mortgage calculator from 99.coto perform a floating calculation of the target occupancy.

Read also:

7 List of Cheap Mortgage Interest Provider Banks

Advantages and Disadvantages of Floating Flowers

Advantages and Disadvantages of Floating Flowers


The advantages can only be felt when interest rates decline. The reason is, this makes the amount of installments you pay down from before.

For example, in the first two years of the installment period, the interest rate touched 12 percent. So the amount of installments you pay is IDR 1.2 million per month.

However, entering the third and fourth years, there was a decrease in interest rates to 11 percent.

Then the amount of your installment will decrease to IDR 1.1 million per month.


Meanwhile, the drawback of floating interest is that it tends to increase.

This makes the amount of installments during the credit period will continue to soar, although usually not too significant.

Therefore, this interest rate is suitable for those of you who can indeed take financial risks.

Other Types of Interest Rates in KPR

Other Types of Interest Rates in KPR

In addition to floating, the interest rate that is often applied in the provision of mortgage loans is fixed or fixed.

This fixed calculation refers to the credit ceiling and the amount of interest. Therefore, the amount of the charge on the amount of credit is usually fixed.

Likewise with the number of installments that must be paid every month. It will not increase even if there is an increase in interest rates.

The fixed calculation formula is; loan principal (p) x interest per year (i) x tenor in years
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