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Your Mortgage Amortization Schedule May Contain Shocking Details

When many first-time homebuyers get their mortgage amortization schedule for their proposed
loan, they file it away with all kinds of other paperwork they never intend to look at. This can be
a huge mistake for several reasons. The biggest, perhaps, is the simple fact not paying attention
to this important document can cost you a ton of money.

A mortgage amortization schedule is nothing more than the month-to-month breakdown of what
a loan costs. You can use an amortization schedule calculator to prepare one. The schedule shows
exactly how you can apply monthly payments to a loan as interest builds up, and you eventually
pay off the loan. The first-time buyer who pays attention to the mortgage amortization schedule
will readily see that a $100,000 loan will cost a whole lot more than $106,000 to pay off at a 6
percent interest rate. Having a good understanding of the mortgage amortization schedule and
how it works for a particular loan can arm a homeowner with facts you might need down the road
to help guide financial decisions. For example, understanding exactly where you are on a
mortgage amortization schedule and finally realizing greater principal reduction with payments
might steer you clear of a refinance when it could end costing you a bundle in the long run. It
might also help guide use of any extra cash that might be available. Principal reduction
payments, for example, can take a basic mortgage amortization schedule and throw a big monkey
wrench into it by taking away some of the principal the lender calculates interest payments
against.

Anyone who has never seen a loan amortization schedule will likely be in for a start the first time
they review one. They can look rather scary. Even if you find the lowest rate loan possible, these
schedules show little principal decline during the first few years of a loan. This means a $1,000
payment a month over the course of a few years might only reduce principal by a few thousands
dollars even though you paid out $24,000. This happens because you normally pay for a large
chunk of the initial compounding of interest. Since the principal amount is at its highest,
compounding at a rate of 6 or 7 percent can add a huge lump to what the loan costs.

As a mortgage shopper, you should pay attention to the amortization schedule when it’s given to
you. Doing so can help guide decisions and might even give you some great ideas for paying off
your mortgage quicker. If you are looking at a simple interest mortgage, lenders will allow
principal reduction payments. Banks don’t love this necessarily, but they will apply the payments
to reduce the principal if told to do so. This can quickly change the mortgage amortization
schedule and have it working in your favor and not the bank’s.

By: Marvin Cains

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Posted in Real Estate · August 31st, 2010 · Comments (0)

Your Loan Modification Has Been Declined – What Now?

Your lender just gave you the bad news. Your loan modification has been declined, and you are trying to determine the next step. You, definitely, don’t want to have to deal with a foreclosure, but are unsure what It’s important for you to understand that you’re not alone. Statistics show that approximately one in seven homeowners are behind on their mortgage payments and over eighty percent of loan modifications are being declined. That means that the odds of being in your situation are about the same as being left-handed. You have a great deal of company. With that much consumer hardship, there are more options today than ever before! Whether offered by your own lender, or the Federal Government, programs exist to assist struggling borrowers through these difficult times.

The first thing to consider is whether or not to try and apply for the modification all over again. Your loan modification could have been a really bad idea from day one. Unless your lender has offered you a fixed rate loan with ample principal reduction, being declined for a modification could be one of the best things to ever happen to you! If your mortgage balance is more than twenty percent greater than the value of your home, a loan modification could add fifteen years or more to the length of your mortgage. If you want a real wake-up call, find an online amortization calculator and see how long it takes to pay your loan down to your current home value. If you owe $250,000 on a home worth $200,000, you will owe more than $200,000 until the middle of 2029. That’s right, your two year-old will be able to buy you a drink to celebrate!

Depending upon your overall financial position, bankruptcy can be a viable alternative to a foreclosure. If credit cards, personal debt, judgments and other bills are adding to your mortgage woes, then bankruptcy may be an integral part of a solution. Thankfully, obtaining the guidance of a good bankruptcy attorney can be a great way to help get yourself back on track. Although bankruptcy can forgive large amounts of debt in one fell swoop, the credit effects from bankruptcy can last as long as ten years. With that in mind, bankruptcy is an extreme solution that should be approached very carefully.

I have found that, most often, homeowners can benefit greatly from successfully completing a short sale. You can take advantage of the current anti-foreclosure attitude in Washington to really get back into home ownership as quickly as possible. Many lenders are offering incentive programs allowing you to sell your home for less than what you owe, and still walk away with money in your pocket. One lender is even offering qualified homeowners a cool $5,000 in relocation assistance money! Even the United States government is getting into the game, through the HAFA program. Under HAFA, you can get a price approved before even putting your home up on the market, perform a short sale and, if you qualify, get $3,000 of money at closing. In addition to being able to purchase a new home in as little as two years, your credit won’t suffer the same kind of catastrophic effects as it would from a bankruptcy or foreclosure. Employing a Realtor specializing in short sales is a great place to start. They are up to date on all of the current rules and regulations about short sales, don’t charge any up front fees and don’t make any money at all until they successfully complete your short sale. Finding the right Realtor to represent you is very important to make sure that you achieve your goal of being released from all financial liability from your lender.

The most important thing for you to remember is that, whatever direction you choose to go, choosing a licensed professional who specializes in your area of need is the only way to go. Make sure to personally interview any potential candidates. State license boards, professional organizations and trade groups all keep diligent records that are readily available to anyone seeking information about a particular practitioner. This is your financial future that you’re addressing here. You can’t be too careful. A qualified professional will want you to know all about their business history and qualifications! Real pros are proud of their accomplishments and more than happy to share them openly. With a little bit of diligence and care, you are well on your way to bringing piece of mind and financial stability back into your life!

By: Jeremy Colonna

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Posted in Real Estate · August 30th, 2010 · Comments (0)

Amortization Schedule Breakdown and Understanding Principal Vs Interest

Amortization Schedule Calculator

Understanding an amortization schedule can be very useful. A mortgage amortization schedule is broken down on a monthly basis to show you exactly what you’re paying the bank each month and how much you still owe. I could probably survey 100 people and 50 of them wouldn’t even know how much they owe on their mortgage. These people are going to be taken advantage of at some point in the mortgage process. With some basic knowledge on mortgage calculators and interest rates you can understand when someone might be trying to trick you.

Your mortgage is recalculated each month based on how much principal is paid down. Your mortgage payment will always stay the same, but the principal goes up and the interest will come down as time goes on. Example below:

Enter this information into a mortgage calculator;

Mortgage amount – $100,000.00

Fixed Interest Rate – 6.0%

Years – 30

Based on that information you will see that the monthly mortgage payment is $599.55 and over the course of 30 years you will have paid $115,838.19 JUST in interest! That’s more than the cost of the home itself! It’s only natural to try and reduce that number. First, we need to understand it by looking at the information from the mortgage calculator.

The graph below shows you the breakdown of each payment you make over the first year.

Monthly Payment – $599.55

Month Interest Payment Principal Payment Remaining Balance

$100,000.00
1 $500.00 $99.55 $99,900.45
2 $499.50 $100.05 $99,800.40
3 $499.00 $100.55 $99,699.85
4 $498.50 $101.05 $99,598.80
5 $497.99 $101.56 $99,497.24
6 $497.49 $102.06 $99,395.18
7 $496.98 $102.57 $99,292.61
8 $496.46 $103.09 $99,189.52
9 $495.95 $103.60 $99,085.92
10 $495.43 $104.12 $98,981.79
11 $494.91 $104.64 $98,877.15
12 $494.39 $105.16 $98,771.99

First of all, in the amortization schedule the “Interest payment” and “principal payment” columns will always equal your monthly payment amount of $599.55. Some of it will go toward the $100,000 that you owe, and the rest of it goes toward interest.

Notice that the amount you owe is lowered by the amount of principal you pay each month (100,000 – 99.55 = 99,900.45) If you pay an extra $200.00 toward principal then it would be 100,000 – 99.55 – 200.00 = 99,700.45.

The interest payment goes to the bank for loaning you that specific amount of money. The bank tells you the yearly interest rate (6%) for added confusion because it’s actually calculated monthly. Take your yearly interest rate and divide it by 12 (12 months). You can plug those numbers into a mortgage calculator or see the graph above. 6% / 12 months = 0.50% per month. So you owe 100,000 x .005 (.50%) = $500.00 in interest for the first month (See above graph). So the less money you owe the bank, the less interest you pay each month. That’s why paying principal down faster is better.

Like I said before, each month the mortgage payment is recalculated so the amount of principal you pay each month is up to you! No matter how you look at it, you owe the bank $100,000.00 and while you owe that money they want something in return (Interest). I believe banks are very fair with the interest rates they offer, whatever they might be. Otherwise you would have to save $100,000.00 to buy a home, rather than just the down payment, which means most people wouldn’t ever buy a home at all.

By: Chris G Bell

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Posted in Real Estate · August 21st, 2010 · Comments (0)

9 Steps to Get Out of Debt – Part 3

Step 3 – Analyze Your Debt

The next step is to figure out exactly how much you owe. First, make a list of every debt you have. Not just credit cards, everything. Credit cards, department store credit, mortgages, car payments, unpaid past-due bills, student loans — everything.

You do not need to count items such as recurring bills like electric, gas, cable, etc. These are not debt, they are recurring expenses. At any time you could shut these off and not owe any additional money, although it may make life unpleasant, to say the least.

Once you have a list of what you owe, you need to determine what your remaining balance is on each item, the current interest rate and your monthly payment for each debt. On most loans you’ll be able to find this information on your monthly bills. However, you may have to make some phone calls to get this information for other debt. Add the remaining amount on each of these items together, this is your total amount of debt. Also, add together your monthly payments for each of these debts to determine the total monthly cost of your debt.

Now, you need to determine how much this debt is going to cost you if you continue making the payments you currently are. You can do this by completing an amortization table for each debt. Don’t worry, we’re not going to make you do this yourself, you can use our amortization calculator located at destroydebt.com. This will tell you two key pieces of data: how much each debt is going to cost you, and when it will be paid off. Add the total cost of each loan together; this is the total cost of your debt. This number can be scary at first, but don’t get too worried yet, this should be the last time you see this number.

If your total monthly debt is greater than 50% of your net monthly income, or you have found yourself in a situation where you are unable to pay your bills and have fallen behind by several months, I would suggest you stop here and seek the advice of a professional financial counselor. Otherwise, continue on.

By: Jeremy Zongker

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Posted in Finance · July 29th, 2010 · Comments (0)

Using Amortization Spreadsheets to Make Big Money

Amortization spreadsheets can be intimidating when viewed from a distance, but once they are understood, they can be very useful. A good amortization spreadsheet or amortization schedule or table as they are also known, can be helpful in saving you money by informing you which mortgage offer is best for you. They can also help you to plan a strategy to pay off your mortgage ahead of time by adding a relatively small amount to your monthly payment.

Doing this will free up investment capital so you can make money, a lot of money. In fact, right now you will learn how to build amortization spreadsheets. Then you’ll see how to use them to pay off your mortgage quickly and then parlay those savings into big-time money.

What to enter into an amortization calculator

Most amortization spreadsheets are simple to construct when you are using a good online amortization calculator website. All you need to do is input the total amount of the mortgage, the interest rate and the length of the mortgage. Some amortization calculators ask for the length in years, others ask for it in months, for instance, 360 months instead of 30 years.

After you click the calculate button you’ll see your amortization spreadsheet. You will notice each month’s payment is broken down into two parts, interest and principal. You’ll also notice the interest part of the payment; at least in the early part of the mortgage, will be by far, the higher number. This is because each of these early payments consists of much more interest than principal. It is this dynamic we’re going to use to save a lot of money.

An example in big money saving

This method will work with any mortgage, but for our purposes, we’ll use these fictitious numbers. We have a mortgage of $225,000. The interest rate is 7.25%, and the length of the mortgage is 30 years. When we enter these numbers into our amortization calculator, we find the monthly payment to be $1,534.90.

When we look at the first payment on our spreadsheet, we see that out of this $1,534.90, $175.53 goes toward principal and $1,359.30 to interest. When we look at the second payment we see, $176.59 will go toward principal and $1,358.31 will go toward interest.

If we pay the second payment’s principal part, $176.59 upfront, or at the same time as the first payment, we will save the $1,358.31 in interest. Why do we save all this money? Because after we make our first payment, we will have a balance remaining on the mortgage of $224,824.48. The difference between how much interest we pay for borrowing this amount of money for 359 months and 358 months is $1,358.31. So, by paying $176.59 with the first month’s payment, we will now be on time to pay this mortgage in full in 358 months instead of 359. Yes, this is amazing!

Now, if we go on down the line paying the principal amount of the next payment due, ahead of time each month. We will be saving the corresponding much higher interest charges.

It does get a little more expensive.

As time goes on, the principal payments get higher and the interest gets lower. Still, after two years, the 24th payment, the principal is only $201.61, and after six years, the 72nd payment the principal is still $269.20.

If we stopped paying our principal payments ahead at this time, we will have knocked three years off of the time it would take to pay our mortgage off in full. This would happen because we would have paid three years on time and three years ahead of time.

Payoff a 30-year mortgage in 15 years

What if we want to pay off the mortgage in 15 years? Here’s the secret. Go to the 180th payment. Here, you’ll see that principal part of the payment is $515.93. If we add this amount onto each of our payments from the first payment of our mortgage to the 180th payment of our mortgage, the mortgage would be paid in full in 180 payments, or 15 years.

$515.93 may seem like a lot to pay upfront, but even if you were to take the principal part of payment number 55, $243.00, and add it on to each payment, you would have your mortgage paid more than 10 years sooner.

Summing it up, you can use this as an approximate formula: On a 30 year mortgage, add to each payment, the amount equal to the principal part of payment number 180 and you will have the mortgage paid in 15 years. Or, add to each payment, the amount equal to the principal part of payment number 55 and you will have the mortgage paid in 20 years. While this formula doesn’t work perfectly for interest rates over 10%, for interest rates around 7%, it is fairly accurate. Now, let’s see how to turn that savings into wealth.

Invest the savings

You could, of course become a real estate investor, but for simplicity sakes, let’s just say you invested $1,534.90 each month in a managed fund that returns 10% yearly. After 10 years you would have $318,127.75. Also, don’t forget you would have a house, which would be paid in full. I’d say you’re pretty close to being rich and it all started with learning how to use your amortization spreadsheet.

By: Edward Lathrop

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Posted in Finance · January 30th, 2010 · Comments (0)

Five Ways to Benefit From Free Home Loan Calculator

The influence of technology and of the internet can be seen and felt everywhere these days, even in the housing market. An incredible 80% of home buyers now use the internet for at least part of their search. In response to this a large number of home loan calculators can now be found online. Although all these home equity loan calculators have slightly different features they all share some basic functions and provide a valuable insight into the home mortgage process. But what are these valuable functions that they perform? Let’s take a look.

Monthly payment

A home loan calculator is able to calculate monthly mortgage payments. All you have to do is input the length and total amount of your mortgage, along with the starting date, interest rate and the program will give you a monthly payment figure.

Some additional features that you will be able to find on various version of a home loan calculator are; how beneficial it might be to make extra or increased monthly payments and how quickly you would be able to pay off your loan if you did so.

Amortization

A home mortgage loan calculator can also help you calculate your amortization schedule; regardless of whether or not this schedule is based on pre-payments you can still get a monthly figure.

This is calculated by use of the following data; the amount borrowed, the term, and the annual rate of interest. Once the monthly figure has been calculated the amortization schedule can be created.

Bi-Weekly Mortgage

These online calculators can also help you figure out additional payments by doing some bi-weekly mortgage payment calculations. These are fairly painless ways of making additional payments which can save you paying interest and thus shorten the term.

The data that is needed to do this is the balance of the loan, the annual interest rate and the amortization period. Once these have been inputted it is simple for the program to offer you the required information.

Scenarios

As well as offering you these hard figures these home loan calculators can also help with answering ‘what if?’ queries. It is possible to make comparison between different possible actions to determine which scenario is better for you. For example, you can work out how the size of your initial down payment will affect the amount of monthly repayment.

Missing Variables

Home loan calculator can also estimate things like; how much money you would have to earn in order to afford a particular mortgage.

There are so many good home equity loan calculators to found online that you just need to enter the term into your favorite search engine and you will be rewarded with thousands of choices. Once you have found one that you are comfortable with it will become a good friend helping you answer the questions you have about making the right decision on a good home mortgage.

By: Maria Mbura

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Posted in Finance · July 4th, 2009 · Comments (0)

Understanding the Amortization Schedule Calculator

The amortization schedule calculator, which can be found on the internet, can aid you in calculating an accurate amortization schedule as it applies to loans or mortgages you are looking into. This schedule will give you an accurate account of what your payments will likely be each month, what amount of your payments are applied to the principal of the loan, as well as what amount is applied to the interest.

The internet is a great source for finding amortization schedule calculators. Typically the calculators are scripts, written in PHP language allowing the calculator to calculator mortgages and loan amortizations fairly quickly, producing your schedules almost instantly. To use the calculator simply type in how much you intend to the loan to be, the current rate of interest, as well as the number of years you intend to pay on the loan. You will also likely have to enter the starting date of the loan. With this information, the calculator will produce an amortization schedule which shows you, in detail, various bits of information about the loan.

The amortization schedule you receive will be pretty self explanatory. First, you will notice it outlines your payments each month, including the date on which the payments are to be made. Then you will also notice that the payments themselves are divided up as well. This is showing you what parts of your payment is being applied to where. For example, part of each payment will be applied to the loan principal, the actual amount you borrow. Another part of every payment will be applied towards the interest of the loan.

After each payment is to be made, the amortization schedule will provide you with a fresh balance. The schedule gives you a full break down of the inner workings of your loan or mortgage. It provides you will a yearly outlook as well as a month to month outlook.

Calculating an amortization loan schedule will give you a better outlook at what you have to pay each month, which then allows you to analyze your own financial situation and budget, giving you the proper tools to make the right decision for your life.

By: Bart Rutherford

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Posted in Finance · December 19th, 2007 · Comments (0)

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