Mortgage Loan Calculator With Amortization

Amortization Formulas:

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

Monthly Payment (USD):

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1. What is a Mortgage Loan Calculator With Amortization?

Definition: This calculator computes your monthly mortgage payment and generates a complete amortization schedule showing how each payment is split between principal and interest.

Purpose: It helps borrowers understand the true cost of a loan over time and how equity builds as payments are made.

2. How Does the Calculator Work?

The calculator uses these amortization formulas:

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

Where:

\( I_k \) — Interest portion of payment k (USD)
\( P_k \) — Principal portion of payment k (USD)
\( B_k \) — Remaining balance after payment k (USD)
\( r \) — Monthly interest rate (decimal)
\( M \) — Fixed monthly payment (USD)

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

3. Importance of Amortization

Details: Understanding amortization helps borrowers see how much interest they'll pay over the loan term and how extra payments can shorten the loan duration.

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 generate a complete amortization schedule.

5. Frequently Asked Questions (FAQ)

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

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

Q3: What's the difference between principal and interest?
A: Principal reduces your loan balance, while interest is the cost of borrowing the money.

Q4: How does changing the loan term affect my payment?
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: Yes, the calculator generates a complete payment-by-payment breakdown of your loan.