Mortgage Loan Payment Calculator - My Little Secret

Mortgage Payment Calculator -- Fantastic Tool -- How To Use It

What is a mortgage calculator? What does a mortgage loan payment calculator do? Why is a mortgage payment calculator different from a common calculator? How does a mortgage home calculator work? Who benefits from a mortgage amortization calculator?

Keep reading because by the end of this article I am going to reveal a secret that could save you more than $100,000.

Mortgage Basics - Principal And Interest

Here are the basics to consider about mortgage amortization.

In its simplest terms a mortgage is simply a loan secured by real estate. After the homeowner's last payment, a property is free of encumbrance.

Refinancing and home purchase mortgages are charged interest by the lending institution. Usually this interest is expressed as a percent such a 5% per year (annually).

Mortgage interest can be paid many different ways such as interest only payments in which the borrower pays only the interest but reduces none of the principal until a later date. Principal means the face amount of the home loan or the amount you still owe.

Why You Need A Mortgage Loan Payment Calculator

Most home mortgage loans in the United States are amortized. That is why mortgage applicants attempting to figure future payments with a common calculator get discouraged.

Amortization is simply a way of reducing a mortgage debt through monthly payments of principal and interest. That's why a mortgage loan payment calculator should actually be called an amortization calculator.

How To Calculate House Payments

A mortgage amortization calculator can tell you what your monthly payment will be if you know three things.

• You must know the term of the loan. Term refers to the period of time required to pay off the mortgage, for example 30 years, 15 years, or 40 years.
• Next you must know the annual interest rate required to borrow on your mortgage. This is sometimes called the nominal rate (named rate) and is the not the same as APR (annual percentage rate).
• Lastly you must know the principal or in plain language the amount of money you want to borrow.

As long as you have at least 3 out of 4 factors (term, interest rate, principal, payment) you can solve for the remaining factor.

View And Print An Amortization Schedule

Some online mortgage home calculators allow you to also view and even print out an amortization schedule. An amortization schedule is simply a spread sheet showing monthly and/or annual payments. You can even see how much interest is being paid each month and the amount of principal you are paying down.

Here's My Secret About Mortgage Amortization

Did you recall my promise to share a secret with you? Here it is!

When you make your mortgage payment, it isn't divided up equally between principal and interest. In the beginning of the mortgage term, a home owner pays far more in interest. Only a minimal portion of the mortgage borrowed is reduced.

That is why borrowers feel disappointed when they look at their statements in the early years of the loan. But amortization used the right way can be beneficial.

By merely paying whatever extra you can afford on a monthly basis toward the loan, the balance can be significantly decreased. This process can knock years and even decades off the term of your home loan.

What you get in return can often mean an interest savings of hundreds of thousands of dollars.

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Article No.136 by Kate Ford, real estate insider and author of Ask Kate. If you enjoyed reading Mortgage Loan Payment Calculator - My Little Secret, you will like our Renting Versus Buying A Home also.