Mortgage Amortization Calculator
The Mortgage Amortization Calculator provides an annual or monthly amortization schedule of a mortgage loan. It also calculates the monthly payment amount and determines the portion of one’s payment going to interest. Having such knowledge gives the borrower a better idea of how each payment affects a loan. It also shows how fast the overall debt falls at a given time.
Loan Information
Down Payment: $100,000
Loan Amount: $400,000
Additional Costs
PMI typically applies when down payment is less than 20%
Monthly Payment: $2,584.83
| Monthly | Total | |
|---|---|---|
| Mortgage Payment | $2,584.83 | $930,537.94 |
| Property Tax | $500.00 | $180,000.00 |
| Home Insurance | $208.33 | $75,000.00 |
| PMI | $0.00 | $0.00 |
| HOA Fee | $0.00 | $0.00 |
| Other Costs | $416.67 | $150,000.00 |
| Total Out-of-Pocket | $3,709.83 | $1,335,537.94 |
Payment Breakdown
Loan Summary
| House Price | $500,000.00 |
| Loan Amount | $400,000.00 |
| Down Payment | $100,000.00 |
| Total of 360 Mortgage Payments | $930,537.94 |
| Total Interest | $530,537.94 |
| Mortgage Payoff Date | May 2055 |
Amortization Overview
| Year | Date | Interest | Principal | Ending Balance |
|---|
| Month | Date | Payment | Interest | Principal | Balance |
|---|
What Is Amortization?
In the context of a loan, amortization is a way of spreading the loan into a series of payments over a period of time. Using this technique, the loan balance will fall with each payment, and the borrower will pay off the balance after completing the series of scheduled payments.
Banks amortize many consumer-facing loans such as home mortgage loans, auto loans, and personal loans. Nonetheless, our mortgage amortization calculator is specially designed for home mortgage loans.
In most cases, the amortized payments are fixed monthly payments spread evenly throughout the loan term. Each payment is composed of two parts, interest and principal. Interest is the fee for borrowing the money, usually a percentage of the outstanding loan balance. The principal is the portion of the payment devoted to paying down the loan balance.
Over time, the balance of the loan falls as the principal repayment gradually increases. In other words, the interest portion of each payment will decrease as the loan’s remaining principal balance falls. As the borrower approaches the end of the loan term, the bank will apply nearly all of the payment to reducing principal.
Amortizing a Mortgage Faster and Saving Money
In many situations, a borrower may want to pay off a mortgage earlier to save on interest, gain freedom from debt, or other reasons. Here are some techniques to reduce mortgage balances more quickly:
- Increasing Regular Payments – Making small additional payments each month can save borrowers a considerable amount of money over the life of the mortgage.
- Accelerating Payments – Switching to more frequent payments, such as biweekly payments, has the effect of making an extra annual payment, resulting in significant savings.
- Making Lump Sum Payments – Additional lump sum payments reduce the outstanding balance, resulting in a shorter mortgage term and less interest paid overall.
- Refinancing – Replacing an existing mortgage with a new one, typically at a lower interest rate or shorter term, can save money over time.
Drawbacks of Amortizing a Mortgage Faster
Before paying back a mortgage early, borrowers should consider the opportunity costs. Mortgage rates are often lower than other investments’ potential returns. Paying off a mortgage with a 4% interest rate when you could earn 10% by investing that money elsewhere represents a significant opportunity cost.
Additional considerations include potential prepayment penalties and lost mortgage interest deductions on tax returns. Borrowers should weigh these factors before making additional payments.