What is An Amortization Schedule?

We wanted to use this article to address the amortization schedule for people who are unaware what it is but before we do, it would be important to explain briefly amortization.  Simply put, amortization is a process in which a loan is paid off using structured and periodic payments designed specifically for this purpose.  Keep in mind that amortized loans are not the same as other loans in that the way in which the amount of the loan and the structure of the loan payments are unique.

We wanted to use this article to address the amortization schedule for people who are unaware what it is but before we do, it would be important to explain briefly amortization.  Simply put, amortization is a process in which a loan is paid off using structured and periodic payments designed specifically for this purpose.  Keep in mind that amortized loans are not the same as other loans in that the way in which the amount of the loan and the structure of the loan payments are unique.

Moving on, we want to go over information pertaining to an amortization schedule, along with additional information.  Typically, for an amortization schedule to be determined, a special calculator would be used.  Whether interested in buying a new home or refinancing an existing mortgage, the calculator is a valuable tool.  Best of all, this type of calculator is easy to use and accurate so the amortization schedule is on target.

With the calendar used for an amortization schedule, the amount of money interested in borrowing for a new mortgage or refinance would be entered, along with interest rate, and the number of years for repayment.  At this point, the amount of the monthly Principle and Interest (P&I) payment would be displayed in installments.  With this information, it would be possible to determine the amount of money you could afford to borrow at said interest rate.  Keep in mind that payment amounts determined by the amortization calculator do not include some things such as property tax, mortgage insurance, and hazard insurance payments.

Another benefit of using the calculator to determine amortization schedule is that payment amounts could be determined by using different interest rates, as well as loan amounts.  Having the ability to compare different loan amounts, as well as interest rates and terms would help you see exactly the amount you can actually afford.  This obviously saves time but also eliminates disappointment if looking at homes outside of your financial range.

In addition to all of this, the amortization calculator would help you learn the actual amount you would pay to the lender for the life of the mortgage loan.  Instead of seeing the principle amount, the information would include the total of P&I payments for the full term.  Most people are shocked and some will choose a lower priced home once they see the total dollar amount paid at loan maturity.  Now, if you were interested in making payments so the loan could be paid off early, you would simply adjust the term, which would then show you the amount that would need to be paid monthly.

Now, if you want to get the mortgage paid off as a priority, one option would be to consider an amortization schedule whereby a 30-year loan would be refinanced for a 15-year loan.  Just this alone would save tremendous money.  To determine the exact amount of savings by going this route, you would use the calculator and choose a shorter repayment schedule.  Depending on the actual principle amount of the loan, as well as Annual Percentage Rate, you could easily save more than $100,000 in interest along on a 30-year mortgage moved to a 15-year loan.

The bottom line is that to understand different schedules and to determine the exact amount of mortgage loan you could afford, using a calculator designed for amortization schedules would be a great tools.  Amortization calculators can be used by individuals or mortgage lenders alike.  For instance, if you wanted to plug in different numbers to see what you could feasible afford when buying a home, this would be a valuable tool  However, if you were a professional working with someone interested in buying a home or refinancing an existing home, again the calculator would be extremely helpful in determining the amortization schedule.