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Free Online Calculators Help Determine Mortgage Payments

The slump in the real estate market has made homes more affordable, yet many people are struggling to maintain their current mortgage payments. As a result, homeowners now have several different options to assist them with making their mortgage payments. Under certain conditions a person can refinance, reducing their monthly payments to a manageable amount.

If you are a homeowner wanting investigate your refinancing options, you will benefit from using free online calculators before you contact your mortgage company. These scientific calculators will give you a snapshot of what you can expect to pay based on a number of different factors, including the interest rate, monthly payment amount and the number of payments required to pay off the loan.

One payment structure that is different from other loans is the amortization loan. Amortized loan payments have a fixed interest rate. You can use free online calculators at different real estate and mortgage lender web sites to determine whether or not you can afford these types of payments. These payments are calculated by dividing the principal amount of the loan by the number of months agreed upon for repayment.

So, if you wanted to get a 30 year fixed mortgage loan, you would have 360 months to repay the loan. The interest is added to the principal amount, and each payment is applied to the interest first, then to the principal amount. If you send an additional amount with your payment, you must tell your mortgage company to apply the extra amount to the principal. This will help you save money long-term and reduce the life of the loan. Otherwise, it will take some time before the interest and principal payment amounts equalize with an amortized loan structure.

By: Mike Trump

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Posted in Real Estate · July 28th, 2010 · Comments (0)

How Amortization Works

An amortized loan can be a car loan or a home loan, as long as it is for one specific amount that is to be paid off by a certain date in equal installments. Parts of the payment go toward the interest cost and the remainder goes toward the principal amount. Interest calculated is based on the current amount owed. As the ending balance of the loan reduces, the interest also decreases progressively, termed as “amortization.”

Like mortgages, with an amortized loan during the first few months/years of the loan term, a greater percentage of the payment goes toward interest in comparison to principal balance or the amount borrowed. This can be explained with a mortgage loan for $100,000 at 6.5 percent for 30 years as an example:

The monthly principal and interest payment is $632.07. For the first month, the interest owed for $100,000 is equal to $541.67. The remainder of the payment, $90.40, goes toward principal, thereby reducing the debt by that amount.

The interest owed drops down to $99,909.60 in the second month, so $541.18 goes to interest and $90.89 goes to principal. The interest goes on decreasing with each passing month while the principal reduction increases, and continues until $3.41 goes to interest and $628.66 to principal on the 360th payment.

Basically, half the loan has been paid off after 256 payments (21 years and 4 months). The other half can be paid off in 8 years and 8 months. A typical amortization schedule calculator would produce an amortization table displaying how much interest and how much principal, from the first to the last, is included in each monthly payment.

By: Richard Romando

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Posted in Real Estate · July 26th, 2008 · Comments (0)

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