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A Mortgage Amortization Calculator makes Home Buying Easier!

mortgage amortization calculator

A mortgage amortization calculator can help you sort through the confusing world of interest payments and principal balances fast!

It can be extremely exciting going through the process of choosing a home and imagining yourself decorating it to suit your individual tastes over the coming years and months as you build an investment.
But what you may not consider is the amount of interest you’ll actually be paying over the course of your loan!

A mortgage amortization calculator can help you determine exactly how much owning your home is actually going to cost you over the term of your loan.

Understanding Mortgage Amortization
In order to understand how a mortgage amortization schedule calculator can benefit you before you sign on the dotted line it’s important to first understand exactly how mortgage amortization works.

Okay, you know going into a prospective home purchase that you’ll need to pay interest on the loan. This is commonly expressed as a certain percentage; 5% or 7% interest, for example.

If you are purchasing a $100,000 home, this means that over the course of the loan you’ll be paying back the original $100,000 for the purchase of the home (minus your down payment) along with the interest your financial institution will collect as a fee for the service of loaning you that money.

But how much will that service actually cost you and how long will it take you to actually start paying toward the principal of your loan?

Mortgage amortization is the process used by financial institutions to determine repayment of a loan using regular installments.
Each month, after the mortgage payment is made, the principal and interest are reduced by the payments made.

How Fast Do I Pay Down My Principle?
Many people are surprised to learn, until they start using a mortgage amortization calculator, that under the structure of most mortgage loans; they won’t actually begin touching more than a few meager dollars of the original principal of their loan until they are several years into the mortgage.

Standard Amortization
Take these figures for example: On a standard $100,000 mortgage with a 30 year term at 7% interest the monthly mortgage payment would be $665.30. On the first monthly mortgage payment of this loan you would pay an astounding $583.33 toward interest and only $81.97 toward the principal of the loan.

Amazing isn’t it?

That’s the kind of information you can uncover using a mortgage amortization calculator or mortgage table as some people used to refer to it.
Eventually, as you continue to make payments on your mortgage the amount of money that you pay toward the principal of the loan will eclipse the amount of money paid toward the interest on the loan.

That can take years; however.

This kind of information can come in particularly handy after you have already purchased your home and are interested in playing around with the numbers to find out what would happen if you refinanced your home.

A mortgage amortization calculator can also help you to determine what the results would be if you added just a little bit more to your monthly mortgage payment.

Negative Amortization
In the event that you have had some financial difficulties and have not been able to make your monthly mortgage payments, or perhaps only a portion of your monthly mortgage payment you may run into a situation known as negative amortization.

A mortgage amortization calculator can also come in quite handy in this type of situation as well!

Negative amortization arises when the principal of the loan continues to rise instead of decrease.
For example, if you were only able to pay a portion of your mortgage loan for a few months what would commonly occur is that the lender would apply the amount you were able to pay toward the interest of the loan instead of the principal.
In the end, this not only increases the principal of the loan but the term and total interest as well because it will now take longer to pay off the loan.

To find out just how much negative amortization might arise from such a situation, you could use a mortgage amortization calculator.

A mortgage amortization schedule calculator can be helpful at just about any time during the life of your loan:

  • Before you purchase a home
  • In order to refinance
  • To determine the effects of negative amortization