1. What is a 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 borrowers 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 formulas:

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)
• \( M \) — Monthly payment amount (USD)

Explanation: Each payment first covers the interest due on the remaining balance, with the remainder going toward principal.

3. Importance of Amortization Tables

Details: Understanding amortization helps borrowers see how much they're paying in interest versus principal, and how extra payments can shorten the loan term.

4. Using the Calculator

Tips: Enter the loan amount, interest rate, and loan term. The calculator will show a detailed breakdown of each payment.

5. Frequently Asked Questions (FAQ)

Q1: Why does early in the loan more go to interest?
A: Interest is calculated on the remaining balance, which is highest at the start of the loan.

Q2: How can I pay less interest overall?
A: Make extra principal payments to reduce the balance faster and shorten the loan term.

Q3: What's the difference between APR and interest rate?
A: APR includes fees and other loan costs, while the interest rate is just the periodic rate.

Q4: How does loan term affect payments?
A: Shorter terms mean higher payments but less total interest paid.

Q5: Can I change the payment frequency?
A: This calculator assumes monthly payments. Other frequencies would require adjustments to the rate and term.