1. What is a Home Mortgage Amortization Calculator?

Definition: This calculator shows how each mortgage payment is split between principal and interest over the life of the loan.

Purpose: It helps homeowners understand how their payments are applied and how much interest they'll pay over time.

2. How Does the Calculator Work?

The calculator uses these amortization formulas:

Where:

• \( I_k \) — Interest payment for month k
• \( B_{k-1} \) — Loan balance at start of month k
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( P_k \) — Principal payment for month k
• \( M \) — Fixed monthly payment amount
• \( B_k \) — New loan balance after month k

Explanation: Each payment first covers the interest due, then reduces the principal. As the principal decreases, less goes to interest and more goes to principal.

3. Importance of Amortization Schedule

Details: Understanding amortization helps with financial planning, comparing loan options, and evaluating the impact of extra payments.

4. Using the Calculator

Tips: Enter the loan amount, annual interest rate, and loan term in years. The calculator will show your monthly payment and total interest paid.

5. Frequently Asked Questions (FAQ)

Q1: Why does most of my early payment go to interest?
A: This is how amortization works - interest is calculated on the current balance, which is highest at the start.

Q2: How can I pay less interest overall?
A: Make extra principal payments, refinance to a lower rate, or choose a shorter loan term.

Q3: What's the difference between interest rate and APR?
A: APR includes fees and other loan costs, giving a more complete picture of the loan's cost.

Q4: How does changing the loan term affect my payments?
A: Shorter terms mean higher monthly payments but less total interest. Longer terms lower monthly payments but increase total interest.

Q5: Can I see the full amortization schedule?
A: This basic calculator shows key totals. For a full schedule, use our advanced amortization calculator.