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Mortgage Amortization Graph
This is a typical mortgage calculator for fixed-rate mortgage loans. This calculator has graphing capabilities and can also display either monthly or annual amortization schedules based on the loan starting date. You can also add property taxes, PMI costs, HOA fee, insurance, and other related costs to estimate your total monthly out-of-pocket cost.
A mortgage is a loan secured by a property – usually a real estate property. A real estate mortgage includes the following key components:
- Loan Amount—the amount you borrow from your lender or bank. The loan amount you can borrow normally correlates to your household income or affordability. To estimate the amount you can afford, please use our House Affordability Calculator.
- Down Payment—a percentage of the total amount of the loan, to be paid upfront. In the United States, if the down payment is less than 20% of the total property price, a PMI normally must be purchased until the principal arrives at less than 80% of the total property price. The PMI rate normally ranges from 0.3%-1.5% (typically 1%) of the total loan amount, depending on various factors. Additionally, banks normally will not give you a good interest rate if your down payment is less than 20%.
- Loan Terms—the length of time you have to repay the loan. Typical loan terms in the United States vary from 30 years, 20 years, 15 years, 10 years, 5 years, and so forth. Normally, the shorter the loan term, the lower the interest rate.
- Interest Rate—the interest rate of a mortgage can be "fixed" (otherwise known as a fixed-rate mortgage, or FRM), or "adjustable" (otherwise known as an adjustable rate mortgage, or ARM). For ARMs, the interest rate is generally fixed for a period of time, after which it will periodically "adjust," based on market indices. An ARM transfers part of the risk to the borrower; therefore, the initial interest rate is normally 0.5% to 2% lower than a 30-year fixed rate. Mortgage interest rates are normally expressed in Annual Percentage Rate (APR), which was sometimes called nominal APR or effective APR. It is the rate expressed as the periodic interest rate times the number of compounding periods in a year. For example, if your mortgage rate is 6% APR, it means you will pay 6%/12 = 0.5% interest every month. Normally, the transaction cost and fees are taking into account when calculating APR.
- Repayment—the most common way to repay a mortgage loan is to make monthly, fixed payments to the lender. The payment contains both the principal and the interest. For a 30-year loan, the majority of the payments you make in the first few years will cover the interest.
The total cost of owning a home is more than just the monthly payment, or the mortgage. When planning to purchase a home, you should also consider other necessities and extras. The following is a list of the possible costs:
- Property Taxes—A property tax is a tax that property owner pays to governing authority. In the United States, property tax is usually managed by municipal government or county government. The annual real estate tax in the United States varies per location, normally ranging from 0% to 4% of the property value. In some extreme cases, the tax rate can be 10% or higher.
- Home Insurance—Also called homeowner's insurance, is an insurance policy that protect the owner from accidents that may happen to the private residence or other real estate properties. Home insurance policies in the United States also contain personal liability coverage, which protects against lawsuits involving injuries that occur on and off the property. Home insurance is required by most lenders. The cost of home insurance varies per locations, condition of the property, coverage amount, etc. Typically, the annual cost ranges from 0.1% to 5% of the property values.
- PMI Insurance—Private Mortgage Insurance (PMI) is an insurance policy that protects the mortgage lender if the borrower is unable to repay. In the United States, if the down payment is less than 20% of the property value, the lender normally will require the borrower to purchase PMI until the loan-to-value ratio (LTV) reach 80%. PMI price varies per down payment amount, size of the loan, credit of the borrower, etc. The annual cost typically ranges from 0.3% to 1.5% of the loan amount.
- HOA Fee—Homeowners Association (HOA) Fee is the fee that imposed on the property owner by HOA, which is an organization that helps maintaining and improving property and environment in the same group. Condominium and townhouse normally have HOA. It may also exist in some single family community. HOA fee typically ranges from a few hundreds to a few thousand dollars per year in the United States.
- Other Costs—This includes utilities, home maintenance costs, etc. Home utilities and maintenance costs can be expensive. For example, it is common to spend more than $500 per month in heating during the winter months in New York for a 2,000 square foot house. Maintenance costs can be expensive too. It is not uncommon to spend 1% of your total property value for home repairs each year.
- Closing Cost—It is fees paid at the closing of a real estate transaction. It is not a recurring fee yet it can be expensive. In the United States it includes attorney fee, title service cost, recording fees, survey fee, property transfer tax, brokerage commission, mortgage application fees, points, appraisal fees, Inspection fees, home warranties, pre-paid home insurance, pro-rata property taxes, pro-rata homeowner association dues, pro-rata Interest, etc. Not all of these are applicable depending on your specific situations. The seller will share some of the cost. However, it is normal to pay $10,000 closing cost on a $300,000 transaction for a buyer.
Property taxes, home insurance, HOA fee, and other costs increase with time, which can be estimated in the results of this calculator.
In many situations, mortgage borrowers may want to pay off their mortgages earlier in whole or in part. Typical reasons are home selling, refinance, interests saving, etc. Most mortgage lenders allow borrowers to pay off up to 20% of the loan balance each year. Some lenders may have prepayment penalty for one time payoff, mainly to prevent borrowers from refinancing too soon, which will affect the lenders' profit. One time payoff due to home selling is normally exempted from prepayment penalty. The penalty amount normally decreases with time and phases out within 5 years. Few lenders will charge prepayment penalty regardless of home selling or refinance. So, be sure to study the loan terms carefully. Other borrowers may want to pay off their mortgage loan earlier to cut down the interest. Typically, there are 3 ways to do so:
- Make extra payment whenever you can—For a 30-year loan, the majority of the payments you make in the first few years will cover the interest. Any extra payment will directly cut down the loan balance, which may save you thousands in interest. Some people form the habit to pay extra every month. Others pay extra whenever they can.
- Make bi-weekly pay of half month's payment—Since there are 52 weeks each year, this is equivalent to making 13 months of mortgage repayment in a year instead of 12. Therefore, the loan will be paid off earlier.
- Refinance to a loan with shorter term—Normally, the interest rate of shorter term mortgage loan is lower. Therefore, the borrower not only repays the loan balance faster, but also cuts down the interest rate. However, this imposes a higher pressure on the borrower and may have fee or prepayment penalty involved.
The methods above can be used combined or separately based on the specific situations. Our mortgage calculator above can help evaluating the options. Please be aware that the rate of mortgage is very low compared with other loans. Also the mortgage interest is tax deductible. Furthermore, the home equity accumulated may be counted against the borrowers when applying for need-based college aid. So, be sure to study other investment options before pay off the mortgage loan earlier.