Mortgage amortization is the accounting for amortized home loans. It is a process of decreasing the payment of mortgage interest and expanding the payment of mortgage essential over the period of a loan term.
For example, if you take a mortgage loan of 0,000 with 6% interest rate over 30 years; your monthly mortgage payment will be 9.55. Assuming your introductory payment date starts on 1st September, your first interest payment is calculated by multiplying 1/12 of the interest rate times the loan principal; which is 1/12 x 0.06 = 0.005 x 100,000 = 0.
Calculate Mortgage Interest
Therefore, on 1st September, you will be paying 0 interest; the remaining .55 is used to pay the loan principal; hence reduces your loan balance to ,900.45.
This process will repeat each month until the end of your mortgage term. Each month the measure of the payment allocated to interest will gradually decrease while the measure allocated to essential will gradually increase.
For example, on 1st October, you will be paying interest of 0.005 x ,900.45 = 9.50; and 0.05 for principal; hence reduces your loan balance to ,800.40. On 1st November, your interest due will be 0.005 x ,800.40 = 9; and 0.55 for principal; hence reduces your loan balance to ,699.85.
Of course, there is mortgage calculator you can use to generate the Full Amortization table. You just need to input your mortgage amount, interest rate and loan period.
Hope you now understand why it could be advantageous to make a larger down payment. When you put down more payment up front, you essentially sell out the loan essential and shorten the loan period; hence reducing the interest cost as well. Other way to sell out interest cost is of policy to negotiate a great interest rate with your lender.
Another way some borrowers use to sell out interest cost is to growth the whole of their payment. For example, if you paid 9.55 on 1st September (instead of 9.55); you would sell out the essential to ,800.45; which in turn would sell out the interest cost due on 1st October to 9.
insight Mortgage Amortization - Key to sacrifice Your Mortgage Interest Cost Calculate Mortgage Interest
No comments:
Post a Comment