Lower rate mortgages affect the amortization of your loan in a big way because it not only makes it possible to pay down your mortgage quicker, you also pay less monthly in interest expenses. It is important to remember that interest expenses are tax deductible.
If paying down your loan early is important to you. Most amortization calculators will let you factor in an extra monthly payment every year.
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In the early days of your mortgage amortization you will notice that the calculator shows more interest paid. This is because out of your entire monthly payment, only a portion of it is applied to the principal (the actual price of the home). The amount taken out of your payment to pay interest on your loan will correspond to the rate you have on your mortgage.
Use an amortization calculator once you have determined your estimated interest rate, loan amount, and mortgage term. Most home loans are for a term of thirty years. A great interest rate by todays standards is 5%. Even if you are not so fortunate to get a 5% interest rate you will still fare far better than even those with the best credit in the early 80s.
Amortization is the gradual elimination of a liability, such as a mortgage, in regular payments over a specified period of time. These payments must be sufficient to cover both principal and interest.
Just as a business allocates a depreciation expense over the lifetime of its equipment and buildings, your monthly mortgage payments are amortized over the life of your loan.