Mortgage Amortization Calculator – Forbes Advisor
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If you’re paying off a mortgage on an amortization schedule, that means you’ll be making monthly payments for the life of the loan. These payments are applied to your loan principal as well as interest – typically more of your payments are allocated to interest earlier in your repayment period.
Most mortgages are amortized, so you’ll know exactly what you owe each month without any surprises. You can use an amortization calculator like the one below to estimate your monthly payment schedule.
How to use the Mortgage Amortization Calculator
A mortgage amortization The calculator can be a useful tool for estimating the breakdown of your payment schedule month by month. After entering the loan amount, repayment term, interest rate, and loan start date, you will see your monthly payment amount and the number of payments you will owe during the loan term. You will also see your total interest charges and your total repayment charges along with your estimated repayment date.
You also have the option to indicate if you plan to make additional payments to get an idea of how much you could save on interest and if you could shorten your repayment period.
Mortgage Amortization Calculator Definitions
- Amount of the loan: This is the amount you borrowed from your mortgage lender to cover the purchase of your home.
- Interest rate: Lenders charge interest in return for letting you borrow money. Your mortgage interest rate represents the amount of interest you will be charged, expressed as a percentage of the principal of your loan.
- Term of the loan: This is the number of years you have to pay off your mortgage. Common mortgage terms include 10, 15 and 30 years oldalthough other terms are also available.
- Number of payments: This represents the total number of monthly payments you will make over the life of the loan. For example, if you have a 15-year loan, you will make around 180 monthly payments.
- Monthly payment: This is the amount you will have to pay each month. Part of this sum will go towards the principal of your loan while the rest will go towards interest.
- Additional payments: If you want to pay off your loan faster, making extra payments might be a good strategy. It can also save you money on interest.
- Lump sum payment: If you have extra money in the bank, you might decide to put it towards your mortgage, this is called a lump sum payment. In this case, you can opt for recast your mortgagewhich will not change the term of your loan or the interest rate, but may reduce your monthly payment due to a shorter amortization period.
- Principal and interest: The principal of your loan is the exact amount you borrow from the lender. Interest is what you pay the lender for the borrowed money. Your monthly payments will be split between principal and interest. Typically, your payments will cover more interest earlier in your loan term, while later payments will be applied primarily to your principal.
- Total Interest: This is the total amount you will pay in interest charges over the life of your loan.
- Total loan cost: This is the total you will pay on your mortgage, including principal and interest.
- Payment date : This is the estimated date on which you will have repaid all of your loan.
What is mortgage amortization?
Mortgage amortization is a financial term that refers to the process of paying off your mortgage in monthly installments according to an amortization schedule. Your loan’s amortization schedule will show how your monthly payments will be split between principal and interest and how that will change over time as you repay more of your loan.
In general, most of your payments will be used to repay the interest on the principal at the front of the loan period. In other words, interest is pre-charged at the start of the loan period. However, this will reverse over time and you will end up paying more for principal and less for interest over the course of the loan.
How Calculating Depreciation Helps You
Calculating your mortgage amortization can help you determine how many important details about your loan, including:
- How much you will pay for principal and interest each month
- How much you’ve paid in total so far each month and how much you still owe (now or at a later date)
- What will be your total interest and redemption fees
- How making extra payments can save you money on interest or shorten your repayment time
You can also use the Mortgage Amortization Calculator to estimate things like how much more you will need to pay to pay off your loan within a certain time frame or how much home equity you built.
How to pay off your mortgage faster
Several strategies can help you pay off your mortgage faster such as:
- Make additional payments. Whether you put a little more on your loan each month, make an extra payment each year, or make payments every two weeks instead of a monthly payment, it can help you pay off your loan faster and save money on interest.
- Redesign. If you have extra funds in the bank or unexpectedly make money, you might consider making a lump sum payment on your mortgage and recasting the loan. While this won’t change your interest rate or term, it will lower your monthly payments and if you choose to apply your savings to your loan, you could pay it off even faster.
- Refinancing. You could also consider refinance your mortgage, where you repay your old loan with a new loan with different terms. Depending on your credit, this could put you down interest rate, which could save you money on interest and possibly help you pay off your loan faster. You can also choose to shorten your repayment term, but while this will lower your overall interest costs, it will likely increase your monthly payments.
Keep in mind that some lenders impose prepayment penalties. So if you are thinking of pay off your mortgage in advance, be sure to check with your lender or review your loan agreement to see if any of these charges will apply to you.