Bankrate Mortgage Calculator Tool Amortization Schedule

Amortization Formula:

\[ Monthly\ Payment = P \times \frac{r(1+r)^n}{(1+r)^n-1} \]

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1. What Is An Amortization Schedule?

An amortization schedule is a table that shows the breakdown of each mortgage payment into principal and interest components, along with the remaining loan balance after each payment. It illustrates how your loan balance decreases over time.

2. How The Amortization Calculation Works

The calculator uses the standard amortization formula:

\[ Monthly\ Payment = P \times \frac{r(1+r)^n}{(1+r)^n-1} \]

Where:

\( P \) — Principal loan amount
\( r \) — Monthly interest rate (annual rate ÷ 12)
\( n \) — Total number of payments (loan term in years × 12)

Monthly Breakdown: Each payment is divided into interest (based on current balance) and principal (the remainder). As the loan matures, the interest portion decreases while the principal portion increases.

3. Understanding Your Mortgage Payments

Details: The amortization schedule helps you see how much interest you'll pay over the life of the loan and how extra payments can reduce both your loan term and total interest paid.

4. Using The Amortization Calculator

Tips: Enter your loan amount, annual interest rate, and loan term in years. The calculator will generate a complete payment schedule showing how each payment affects your loan balance.

5. Frequently Asked Questions (FAQ)

Q1: Why does the interest portion decrease over time?
A: As you pay down the principal, the interest is calculated on a smaller balance, so the interest portion of each payment decreases while the principal portion increases.

Q2: How can I pay off my mortgage faster?
A: Making extra principal payments reduces your loan balance faster, which decreases the total interest paid and can shorten your loan term significantly.

Q3: What's the difference between interest rate and APR?
A: The interest rate is the cost of borrowing the principal, while APR includes the interest rate plus other loan costs like points and fees.

Q4: How does a shorter loan term affect payments?
A: Shorter terms have higher monthly payments but much less total interest paid over the life of the loan.

Q5: Can I change my amortization schedule after getting a mortgage?
A: Refinancing can change your amortization schedule, but your original schedule determines the baseline payment structure.