Learning to Read a Mortgage Amortization Table

Written by: Mike Valles

A mortgage amortization table is built into fixed rate mortgage documents, and they reveal how much interest is being paid each month, as well as showing how much of your payment will go toward reducing the principal. The end purpose of mortgage amortization tables is to show when the mortgage will be completely paid off. Having this information and knowing how to read it can be very useful to you in a variety of ways.

Benefits of Knowing How to Read a Mortgage Amortization Table

One important benefit of knowing how to read a mortgage amortization table is that it lets you see where your money is going each month. You will clearly see at the start of your mortgage that nearly all of your payment is going to pay for the interest, and just a little of it towards the principal. The reason for this is because the interest is much greater when the principal is the largest, then it becomes less as the principal is reduced monthly.

The Various Columns in a Mortgage Amortization Table

Most mortgage amortization tables are based on a monthly calculation. There is a Date column that shows you when the payments are due. If the payment is made on time, then the remaining principal and interest figures are displayed in the next columns. The final column is the Balance column, and this one reveals how much debt still remains. The last payment at the bottom of the amortization schedule may be different than all others, because the numbers can’t always be divided into equal payments, says Larry Simmons in an article at SFGate.com.

Mortgage Amortization Schedules May Include Some Payment Options

Some mortgage documents will also show you what happens to your payments when you increase the payment each month. Of course, every situation cannot be included since there are an endless number of payment possibilities. The loan amortization tables will show you what happens to the overall debt and where the money goes. Paying more each month is an excellent way to save thousands of dollars because it rapidly reduces the principal, which then cuts down on the amount of interest you will be paying over the life of the mortgage.

Bi-Monthly Payments May Help You Save Money

Reading an amortization table will help you understand what happens when a lender will accept payments on a bi-monthly basis. If they are willing to do this, less interest is accrued because the interest calculations are made more frequently and quickly include the additional or more frequent payments. Many lenders, however, only recalculate the interest once a month – which would defeat the purpose of paying bi-monthly, but it would not reduce the benefits of paying more each month. You would have to ask the lender directly in order to find out when the interest is calculated to see if this could benefit you. If they calculate it bi-monthly, then this mortgage amortization calculator at BankRate can help you see the benefit.

Create Your Own Mortgage Amortization Tables

Wisegeek.com advises that you can create your own mortgage amortization table online in order to consider your own options and experiment. Creating your own lets you punch in any numbers you want, which can let you see what happens by paying more or less each month.


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Learning to Read a Mortgage Amortization Table

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