Mortgage Amortization Calculator
This is a calculator that gives out the annual or monthly amortization schedule of a mortgage loan. It can also give out the monthly payment amount and interest accumulation.
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Mortgage Amortization Graph
Amortizing a Mortgage Faster and Saving Money
Mortgage loans are based on long periods for repayment. This is only natural, because the sums of money lent are usually quite large.
But the long loan periods also maximize profit for the lending banks. As you can see from the calculator and the amortization table how the larger interest payments are concentrated at the beginning of the loan.
To amortize a mortgage faster, and save money, there are various techniques you can use. You may have to negotiate with the lending bank to use these techniques, if the loan contract does not explicitly permit them.
But, today, banks are under pressure to limit the size of their loan portfolios – regulators oblige them to keep more reserves than in the past to help cover lending. Often they will welcome the chance to get loans off their books earlier, even if it means sacrificing a small part of the profit on the loan.
Increase Regular Payments
One of the ways to pay off your mortgage faster is to increase the amount of your regular payments. By paying even a small extra amount each month, you can save a considerable amount of money and time.
But The rewards are considerable. Suppose you have a mortgage of $150,000 which is to be amortized over 25 years, at an interest rate of 5.45 percent.
By paying an extra $50 a month over the life of the mortgage, John would save over $14,000 and pay off the mortgage two and a half years sooner. You can verify this example on the mortgage calculator.
Accelerate Your Payments
This is another option in which a small addition to your monthly payment can save a large amount over the life of the loan.
Most financial institutions offer a number of payment frequency options, running from monthly to bi-weekly. Move to a more frequent mode of payment, i.e. from monthly to twice a month. This has the effect of making an extra annual payment.
So, with a mortgage of $150,000, amortized over 25 years, and an interest rate of 6.45 percent, making biweekly payments will save you nearly $30,000. You will be slightly raising the amount you make at each payment – instead of about $850 per month, you will make two payments of $500. But the reward is truly great.
Make Lump Sum Payments or Prepayments
A prepayment is a lump-sum payment that you make, in addition to your regular mortgage payments. The prepayment reduces your outstanding balance and allows you to pay off your mortgage faster.
The sooner you can make the prepayment, the less interest you will pay over the long term, and the sooner you will be mortgage-free.
But banks have many conditions governing prepayments, for the obvious reason that they reduce the banks' interest earnings.
There may be a penalty for prepayments. Or, there may be a cap on how much you can pay in lump sum form. Or there may be a minimum amount specified for prepayments.
All of this will be in your mortgage agreement, but, ideally, you should have thought about prepayments before signing an agreement and made sure that you had the opportunity to make them. Again, banks are more willing to get mortgage loans off their books today than they were in the past, so you may have bargaining room even if your mortgage agreement limits your access to prepayments.
You can gauge the effect of prepayments on your mortgage by using the calculator.
Refinance Your Mortgage
In the volatile interest rate climate today, you will find that refinancing your mortgage is far easier than it was in the past. Banks are, in fact, eager to get refinancing business and offer good deals.
In refinancing, you replace your current mortgage with a new one – a new loan, a new interest rate, and new conditions as well.
Refinancing can offer real opportunities, but you can lose out if you don't make a careful comparison of the offer with what you already have. Read the agreement carefully, and note all the costs and fees associated with refinancing.
There can be conditions that make refinancing far less attractive that it seems at first. But, if the price is right, it can also be a very practical way to save money on your mortgage.
For whatever solution you choose to save money on amortizing your mortgage, use the calculator to carefully examine your options.