Mortgage payment in Mexico: the formula and an example

The formula

For a loan of amount P, annual nominal rate r, and n monthly instalments, let i = r / 12 be the monthly rate. The constant instalment M is:

M = P × i / (1 − (1 + i)^(−n))

This is the standard “French” amortisation: the instalment stays the same, but each month it contains less interest and more principal. In month k, interest = remaining balance × i; principal repaid = M − interest; new balance = old balance − principal repaid.

Two assumptions are built in and must be checked against your contract: that interest is the annual rate divided by twelve, and that instalments are paid monthly at the end of each month. A lender may use a different day-count convention, so the contract and the binding offer prevail over this formula.

What the law requires you to be told

Article 5 of the Ley de Transparencia y de Fomento a la Competencia en el Crédito Garantizado (LTFCCG) makes lenders show, in their leaflet, the term, the amortisation system and the periodicity of payments, as well as periodic fees. Article 6 requires the binding offer to state the loan amount, the form of amortisation, the rates and the CAT. So the schedule you receive should state which system applies; see the binding offer guide.

A labelled calculation with Banxico’s figures

Banxico’s table CF303 describes its reference loan as MX$800,000 financed (a MX$1,000,000 home with 20 % down) over 15 years, and reports for August 2026 an average rate of 11.31 %, a minimum of 9.00 % and a maximum of 21.13 %. With P = 800,000 and n = 180 months:

For the 11.31 % case, the monthly rate is 0.1131 / 12 = 0.009425. In month 1 the interest is 800,000 × 0.009425 = MX$7,540.00, so principal repaid is 9,249.11 − 7,540.00 = MX$1,709.11, leaving a balance of MX$798,290.89. In month 2 the interest is MX$7,523.89 and principal MX$1,725.22. Early instalments are mostly interest; the split reverses over time.

These rows combine Banxico’s rates with Banxico’s reference loan; the minimum and maximum are not rates for any specific borrower. They show the sensitivity of the instalment to the rate: from the average to the maximum the payment rises by MX$5,473.57 a month in this example.

What the instalment does not include

The CAT in Banxico’s table (average 13.78 %) is higher than the rate because it adds commissions, mandatory insurance and other charges; see the CAT guide. The instalment above is the interest-and-principal part only. Life, damage and unemployment insurance, which CONDUSEF’s consumer guidance mentions, and any fees come on top as specified in your contract. Property tax (predial) and condominium fees are also separate.

Term and rate: which lever moves the payment more

In the table above the term is fixed at 15 years. A longer term lowers the instalment but raises the total interest, because interest is charged for more months on a slowly shrinking balance. You can test this by changing n in the formula: the instalment falls, while M × n, the total repaid, rises. Likewise, a rate reduction lowers both. Neither effect depends on where the property is, so the same formula serves a flat in a coastal state and a house inland.

How to run your own numbers

1. Take the rate and the term from the binding offer, not from an average.
2. Compute i = r / 12 and n = years × 12.
3. Apply the formula, or use the mortgage calculator.
4. Compare with the payment printed in the offer; if the two differ, ask the lender which convention and which extra charges explain the gap.

Which professional to consult

The mortgage lender provides the amortisation schedule. A real estate lawyer can check that the contract matches the offer. See mortgage lenders and real estate lawyers.