Mortgage Calculator Payment Schedule

Mortgage Payment Formulas:

\[ I_k = B_{k-1} \times r \] \[ P_k = M - I_k \] \[ B_k = B_{k-1} - P_k \]

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1. What is a Mortgage Payment Schedule Calculator?

Definition: This calculator shows the detailed breakdown of each mortgage payment into interest and principal components, along with the remaining balance.

Purpose: It helps homeowners and buyers understand how their payments are applied over the life of the loan and how much interest they'll pay.

2. How Does the Calculator Work?

The calculator uses these formulas for each payment period:

\[ I_k = B_{k-1} \times r \] \[ P_k = M - I_k \] \[ B_k = B_{k-1} - P_k \]

Where:

\( I_k \) — Interest payment for month k (USD)
\( P_k \) — Principal payment for month k (USD)
\( B_k \) — Remaining balance after month k (USD)
\( r \) — Monthly interest rate (decimal)
\( M \) — Fixed monthly payment (USD)
\( P \) — Initial principal amount (USD)

Explanation: Each payment first covers the interest due on the outstanding balance, with the remainder applied to reduce the principal.

3. Importance of Payment Schedule

Details: Understanding the amortization schedule helps borrowers see how much of their payment goes toward building equity versus paying interest, especially important in early loan years.

4. Using the Calculator

Tips: Enter the loan amount (principal), annual interest rate, and loan term in years. The calculator will show the complete payment schedule.

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 outstanding balance, which is highest at the beginning.

Q2: How can I pay less interest overall?
A: Make extra principal payments or choose a shorter loan term to reduce total interest paid.

Q3: What happens if I make an extra payment?
A: Extra payments directly reduce principal, which reduces future interest and may shorten the loan term.

Q4: Does the monthly payment change over time?
A: For fixed-rate mortgages, the total payment stays the same, but the interest/principal allocation changes each month.

Q5: How is the monthly payment calculated?
A: It's calculated using the formula: \( M = P \times \frac{r(1+r)^n}{(1+r)^n-1} \), where n is total number of payments.