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SAC or PRICE: Which is the best table for your financing?

When financing a property in Brazil (whether through Caixa, Itaú, Bradesco, Santander, or Banco do Brasil), the two main options for debt amortization are the SAC and PRICE tables. The choice between them directly impacts the monthly cash flow and the total cost of financing.

1. SAC System (Constant Amortization System)

In the SAC system, the amortized debt amount is the same in all installments (Financed Amount divided by the number of months). Since the outstanding balance decreases constantly and linearly, the monthly interest charges also decrease each month. Consequently:

• The installments start higher and end lower (decreasing).
• The outstanding balance is reduced more quickly from the first month.
• The final cost in paid interest to the bank is usually lower than in the PRICE system.

2. PRICE Table (French Amortization System)

In the PRICE table, the monthly installment amount is constant throughout the entire financing period (disregarding corrections such as TR). Initially, the majority of the payment is composed of interest, and a small fraction is destined to amortize the real debt. Consequently:

• The installments are identical from start to finish (fixed).
• The first installment is significantly cheaper than the first installment in the SAC system (which helps to fit within the 30% income rule).
• Since the debt decreases more slowly initially, the outstanding balance accumulates more interest, resulting in a higher total cost.

The Power of Extra Amortization: How to pay off in less time

Amortizing means paying installments directly to reduce the principal outstanding balance (the real debt), not just advancing future installments with interest. When you make an extra contribution, the bank recalculates the contract in two ways:

1. Term Reduction (Recommended): You continue paying the same monthly installment amount, but the total financing term is drastically shortened. This option generates the greatest interest savings, as the debt is paid off years before the original term.
2. Installment Reduction: The original term remains (e.g., 30 years), but your monthly payment decreases, alleviating the family budget immediately. It saves less interest than term reduction but improves monthly liquidity.

For example, contributing an extra $500.00 every month in a 30-year financing can commonly result in paying off the debt in about 10 to 12 years, saving tens or hundreds of thousands of dollars in interest.

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