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Amortization calculators are not perfect. If you frequently make delinquent payments this will cause changes in your interest and affect youre the repayment of your principal. The calculator assumes that all of your payments are made on time and that your rate is fixed. If you have an adjustable rate, an amortization calculator is not as helpful. Differences in your lenders policy as far as fractions of a penny may be different than that used by the calculator, so all figures given by the calculator should be considered estimates. An amortization calculator can give you an idea of what your loan repayment will be like in practice but is only an estimate.
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Amortization calculators generally allow you to enter in the amount of your loan, the amount of down payment, and the rate of interest. It will calculate this information and give you a monthly payment. For example, if your home is priced at $165,000, you paid 15,000 down, and your interest rate is 7%, the calculator will inform you that your monthly payments will be just under one thousand dollars, $997. There are other calculators that are more sophisticated and will give you the amount of interest you will pay before the amortization period is over. In this case the total interest would be $209,263. Other calculators will tell you that the average monthly interest will be $581 and that after the first year you will have paid $9,584 in interest.
An important calculation that you should look into is that of your amortization including an extra yearly payment. An extra yearly payment may take up to ten years off of your loan. If you are afraid that taking a fifteen year term will put too much stress on your finances, you can take a thirty year term and considering an extra yearly payment to keep from paying too much in interest. However, you should check with your lender to make sure that there is not a prepayment penalty if you pay your loan off early.
Using a more detailed calculator gives you the best picture of how your loan repayment will affect your finances. It is a great tool to see how different rates or terms will help or hurt you. Use our amortization calculator to learn more about the right loan for you or fill out our free short form to contact a lender about your loan.
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