The amortization schedule for a
mortgage loan is nothing but a table that provides the breakdown of monthly
loan repayment installments from the loan’s first payment to its final one. The
amount of each installment of a mortgage is divided into two parts.
One part is
used to pay off the principal balance of the loan (the debt that is owed by
you), whereas the other part pays off the interest portion (the cost of
borrowing). An amortization schedule is a table of periodic loan payments that
depicts the parts of installment amounts covering both the portions separately.
While the overall amount of the
installment remains same each month (especially under fixed rate mortgage), the
portion covering interest and principal keeps on changing. You can use an amortization calculator to see the
amount you’re paying towards principal and interest.
In the initial years of a
mortgage loan, the majority portion of the installment amount covers the
interest portion, whereas a very insignificant portion of the installment
covers the principal.
Therefore, for the first 5-6 years of the loan, the
principal balance is hardly paid off. With time, this status quo shifts in the
favor of principal payments and later on in the loan cycle the majority amount
of an installment covers the balance of the loan.
All Western Mortgage has
developed an easy-to-use loan
amortization calculator that effectively and accurately depicts the amount
you are paying as interest and principal with each mortgage repayment
installment.
All you need to do is enter the amount of your loan, interest rate,
and number of months in the calculator and it will show you a breakdown of your
mortgage. You can check out this mortgage amortization calculator here.
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