This calculator will compute a mortgage's monthly payment amount based on the principal amount borrowed, the length of the loan and the annual interest rate. This calculator will also compute your total mortgage payment which will include your property tax, property insurance and PMI payments. Then, once you have computed the monthly payment, click on the "Create Amortization Schedule" button to create a report you can print out.
Those who will be entangled in the stipulations of a real estate mortgage for any length of time necessarily need a hard and fast long term vision of exactly how the contract is intended to play out. The amortization schedule is just such a document. It is a graphic visualization of every monetary transaction that takes place over each consecutive month of a loan. Each 30 day period, the interest and/or principal balance is reduced, the life of the loan is shortened, and the loan gets one step closer to its total amortization. In the case of adjustable rate mortgages, the annual interest rate may even shift up or down by a set percentage.
What Makes Up the Monthly Mortgage Payment
But the mortgage unfortunately is not as simple as one borrowed sum that must be eventually repaid by the borrower. The monthly mortgage bill that you see is not the figure you might think. There are the real estate taxes, annual homeowner's insurance, private mortgage insurance, floating or fixed interest rate, life term of the loan and the APR to be considered. These factors combine into an acronym known as the PITI – or the Principal, Interest, Taxes and Insurance. This figure is the true sum total that fluctuates monthly on a mortgage until it is gradually paid off by the home owner.
The mortgage bill itself can be divided into two parts: the principal and interest and the regular taxes and insurance charge. These four numbers altogether make up the total of the monthly bill, though these figures may fluctuate distinctly over time depending on the kind of mortgage you possess.
Different styles of loans amortize in different ways. For instance, the interest only loan is one in which the borrower pays only interest for the first five to ten years of the term until the APR is fully paid off and the principal only remains. The balloon payment mortgage is one in which the payments never truly amortize but instead leave a large sum due at the end (the “balloon” payment) which the borrower must only pay at the very end of the mortgage.
But the simplest and generally most common type of real estate loan amortizes first with mostly interest and finally with mostly principal. In other words, for the first few years the borrower will pay more interest than principal and then the ratio will shift and the borrower will finish the loan by paying much more principal than interest. Those who have the financial capability at any point into their mortgage to overpay and therefore shorten the life term of the mortgage should take that opportunity, as those who finish early on their mortgages are richly rewarded with significant savings in interest rate.
This traditional principal and interest amortization schedule can be easily created with just one click using this calculator and the relevant figures that apply to your loan and current financial standing. By viewing a play by play of your balance (to the decimal point) over the next 10, 20, or even 30 years that your loan stands, you will have increased ability to budget and save now for the long marathon ahead.