What's behind the numbers in our mortgage amortization calculator
An amortization calculator enables you to take a snapshot of the interest and principal (the debt) paid in any month of the loan.
"Amortization" is a word for the way debt is repaid in a mortgage, where each monthly payment is the same (excluding taxes and insurance). In the beginning years, most of each payment goes toward interest and only a little goes to debt reduction. That ratio gradually changes, and it flips in the later years of the mortgage. This is amortization at work.
For example, if you get a $200,000 mortgage for 30 years with an interest rate of 4.25%, your monthly principal and interest payments will be $984:
With the first payment, $276 will go to principal (reducing the debt) and $708 will go to interest.
Fast-forward 10 years to the 120th payment and the payment is still $984, but $420 goes to principal and $564 goes to interest.
In the next-to-last payment, $977 goes to principal and $7 goes to interest.
What the mortgage amortization calculator does
Before you get a mortgage, you might want to know how much interest you will pay in total. If you already have a mortgage, you might want to know how much debt you've paid off and how much remains. Or you might want to compare different loan terms before refinancing. NerdWallet's mortgage amortization schedule calculator can help you do all of those things. It allows you to figure out:
How much a particular month's house payment goes toward principal and how much goes toward interest. This information is viewed on an "amortization schedule" — a table that breaks down each payment month by month.
How much interest you will pay over the life of the loan.
In any given month, how much you still owe.
How different terms, like a 30-year versus a 15-year, compare in monthly payments and interest paid over the life of the loan.
To get the most out of the mortgage amortization calculator, you can personalize it with your own numbers. Fill in the data fields to the right of the graph.
The data fields contain the following inputs:
Location.
The value or price of the home.
The mortgage interest rate.
The down payment (or, in the case of a refinance, the value of the home's equity).
The loan's term, from one to 30 years.
The calculator has four tabs:
"Amortization schedule" has the graph. Move the vertical slider to see how much you still owe and how much principal and interest you have paid at the end of each 12-month period.
"Breakdown" shows, month by month, the remaining loan balance after that payment has been made. On computers and tablets, it also displays a mortgage amortization table detailing the principal and interest paid each month.
"Monthly payment" shows the estimated monthly payment, including principal and interest, property taxes and homeowners insurance.
"Compare loan types" gives a side-by-side view of the monthly payments and total interest paid for three loans. From left to right, they are the mortgage whose interest rate and term you specified, and a 15-year and 30-year loan attoday's mortgage rates.
Probably not. The initial interest rate term would be represented well on an amortization schedule, but after the teaser interest rate term ends, it would be difficult to account for future interest rate adjustments.
Any amortization schedule on an ARM is really just an estimate and subject to substantial change.
The simple answer is: The lender gets paid first. In the early years of your mortgage, your monthly loan payment is heavily weighted to paying interest. Just a tiny reduction of the principal loan balance occurs with each payment at this stage. The rest of the payment often goes to insurance, taxes and other expenses wrapped into the monthly amount due.
As years pass, you’ll begin to see more of your payment going to principal — a greater amount is reducing the debt and less is being spent on interest.
To calculate amortization, first multiply your principal balance by your interest rate. Next, divide that by 12 months to know your interest fee for your current month. Finally, subtract that interest fee from your total monthly payment. What remains is how much will go toward principal for that month.
What is an amortization schedule? A mortgage amortization schedule is a table that lists each monthly payment from the time you start repaying the loan until the loan matures, or is paid off.
It's relatively easy to produce a loan amortization schedule if you know what the monthly payment on the loan is. Starting in month one, take the total amount of the loan and multiply it by the interest rate on the loan. Then for a loan with monthly repayments, divide the result by 12 to get your monthly interest.
There is a mathematical formula to calculate amortization in accounting to add to the projected expenses. Amortization of an intangible asset = (Cost of asset-salvage value)/Number of years the asset can add value. Salvage value - If the asset has any monetary value after its useful life.
Example A: A business has a $10,000 software license, which it expects will come to an end in five years. Using the straight-line method, the amortization expense would be $2,000 per year for the next five years. At the end of five years, the carrying amount of the asset will be zero.
Making an extra mortgage payment each year could reduce the term of your loan significantly. The most budget-friendly way to do this is to pay 1/12 extra each month. For example, by paying $975 each month on a $900 mortgage payment, you'll have paid the equivalent of an extra payment by the end of the year.
Paying a little extra towards your mortgage can go a long way. Making your normal monthly payments will pay down, or amortize, your loan. However, if it fits within your budget, paying extra toward your principal can be a great way to lessen the time it takes to repay your loans and the amount of interest you'll pay.
Broadly speaking, loan amortization only considers the principal and doesn't include interest. These are the most common ways to calculate loan amortization: The French method. Also known as the progressive (quota) method, it consists of paying back the same amount each month until the debt is fully settled.
Beginning balance: This is the principal balance you have at the beginning of each new month before you make a loan payment. Scheduled payment: This is your monthly loan payment. This number will be the same every month. Principal: This is the amount paid toward your principal with every payment.
Amortization typically refers to the process of writing down the value of either a loan or an intangible asset. Amortization schedules are used by lenders, such as financial institutions, to present a loan repayment schedule based on a specific maturity date.
The formula is: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1], where M is the monthly payment, P is the loan amount, i is the interest rate (divided by 12) and n is the number of monthly payments.
Introduction: My name is Van Hayes, I am a thankful, friendly, smiling, calm, powerful, fine, enthusiastic person who loves writing and wants to share my knowledge and understanding with you.
We notice you're using an ad blocker
Without advertising income, we can't keep making this site awesome for you.
