Amortization schedules work like the following. Assume your loan amount is $150,000, your interest rate is 7%, and your term is 30 years. Schedules will show you that your monthly payment will be $997. It may also tell you that your monthly interest is $581, your interest paid at the end of the first year will be $9,584, and that by the time your loan is repaid you will have paid $209,263. Good schedules will even show you the amount of principal you are paying versus the amount of interest every month. In the first month with this loan you would pay $122 of your monthly payment to principal but the rest of the $997 towards interest. By the end of the loan term, $992 would be paid to the principal while only $5 would be towards interest. To see your amortization schedules try our free online calculator and then apply for a free rate quote.
Amortization schedules are meaningful for new homeowners who would like to see what difference a few points on their interest rate makes. When financing a home, you have the option of paying what is known as points on your loan. Points are basically 1% of your entire loan amount each and paying them allows you to reduce your interest rate by some marginal amount. Paying points is the way most homebuyers reach their targeted monthly payment amount.
Amortization schedules calculators allow you to enter your loan amount, proposed interest rate, and your loan term and see a complete calculation of each of your monthly payments subdivided into interest and principal each month. Another useful feature of these calculators is the ability to factor in extra monthly payments that you hope to see pay off your loan ahead of schedules.
For a good idea of your repayment schedules picture you can print your amortization for each year of your loan. Each of the years will reflect a different amount of interest paid that you can deduct on your taxes. If you are only interested in getting a feel for what the payments might look like on a new loan, you should consider running an amortization table for a fifteen year loan versus a thirty year loan to see the difference in interest paid over the life of the loan. Typically you will see that the interest paid is about double for a thirty-year loan.