Creating a Loan Amortization Schedule

A mortgage is one of the biggest financial commitments we enter into in our lives. For most of us it is the only way in which we can raise the money to buy our homes. The money is lent to us by a mortgage company for the express purpose of buying a named property.

The mortgage is paid back to the mortgage company typically in monthly premiums. The amount we pay is usually calculated to pay back a certain amount of interest, (whatever that is determined to be), and a certain amount off the capital sum (the mount we borrowed in the first place). It is a wise precaution to create a loan amortization schedule to help you to track the progress of your mortgage.

Mortgages are actually quite complicated contracts. Every payment that we make towards paying off our mortgage is slightly different in terms of how it affects the outstanding components of the loan. In essence there are two main components of any mortgage; the capital sum, and the amount of interest due. What a loan amortization schedule allows you to do is to schedule (list) exactly how much of the capital sum we have paid back and how much is therefore still outstanding, and also much interest we have paid to date and how much more interest we still owe.

There are several types of loan amortization schedule available that you can download from the internet. There is one for example that it is the form of an Microsoft Excel spreadsheet. There is no need to purchase one unless of course you want to, but you can find several which are free to download.

You can enter specific data in relating to your particular mortgage such as; the date you took out the mortgage; the date of the first repayment, the total sum that you borrowed, and the interest rate, and over what period of time the repayments are to be made. The interest rate may of course vary across the life of the mortgage but you have the facility to enter any rate changes, and their dates, as and when they happen.

The loan amortization schedule is a chronological record of your mortgage; in other words it is a record kept by date order. At any one point in time, you can interrogate the schedule to ascertain exactly what is outstanding.

The reason that this information is so important is that it can help you to pay your mortgage off more quickly. The way mortgages work is that in the earlier stages of your repayments, you are paying back mostly the interest. The amount you are paying off of the capital sum is quite small. But should you elect to pay more money than you strictly need to, you can reduce the capital sum quicker, thus reducing the overall amount of interest that you will have to pay. A loan amortization schedule can help you to see this more clearly.

So, not only will you be able to see exactly where your account is at any one point in time in regards to exactly how much you owe, but you will also be able to see very clearly, exactly what any overpayment can do, not only in terms of reducing the total amount of the interest, but also shortening the term of the mortgage.

Remember that each time you reduce the capital sum you reduce the subsequent interest too. This is quite a complicated calculation to make on a monthly basis, year by year, especially with extra overpayments thrown in, but a loan amortization schedule will enable you to forecast exactly where you will be in terms of what you owe, and exactly when you can complete the mortgage. It’s a must-have for a mortgage.

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Loan Amortization Schedule

mortgage loan amortization schedule

Creating a Loan Amortization Schedule

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