Benefits of a Mortgage Amortization Calculator

A mortgage amortization calculator can be very handy when you really want to see where your money is going every time you make a mortgage payment. It can be difficult to do all the figuring on your own and a calculator offers you some great benefits that allow you to keep tabs on just where your money is going.

The Breakdown of a Mortgage Payment

When you make your mortgage payment, not all the money is actually going to pay off the mortgage. Your mortgage payment is actually paying for multiple things. Some of the money you pay goes towards your actual mortgage, the money you borrowed to buy the house, and some goes towards the interest payments.

Figuring out how much is going where can be confusing without the help of a mortgage amortization calculator. The main amount you borrowed, called the principal, grows over time as interest is added to it. So, you cannot do a simple equation to figure out how much you are paying. Even more confusing is how to figure how much of your payment is going to the principal and how much is going towards interest.

Figuring a Payment

In order to figure out your payment without using a mortgage amortization calculator and to see exactly how much you are paying on your principal you start with the total amount you borrowed, the interest rate on your loan and the length or term of the loan. Here is our example:

Borrowed: $100,000
Interest Rate: 9%
Term: 30 years

Without a mortgage amortization calculator, you will need to figure month by month. This will work for the short term, but you can see how figuring every month for the term of 30 years could get tiring. However, here is how to figure the first month, just so you can easily see how much of your payment goes to the principal and how much goes to pay the loan:

Figure 9% of $100,000 and divide that by 12.
You get $750
Your interest payment for that month is $750.
Subtract $750 from the total of your loan payment and you get the amount that is actually going towards your principal.

For most people, the amount going towards the principal is rather small. You are paying mostly interest. To compound issues, each month the amount you owe grows because the interest just keeps adding up. So, to figure the payment for the second month you would have a new loan amount t use to figure the interest being paid.

It is a complicated process to figure out your loan payments. Using a mortgage amortization calculator can simplify things for you and help you to more easily see the breakdown of your monthly loan payment.

Other post you may be interested in reading: mortgage amortization schedule and mortgage payoff calculator

Mortgage Amortization Calculator

free mortgage amortization calculator

Benefits of a Mortgage Amortization Calculator

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