Mortgage Amortization Calculator. Here is the calculator for calculating Mortgage Amortization. This Mortage Amortization calculation tool is free to use and will solve your purpose instantly. You can embed this tool in your excel sheet as well.
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Amortization is a financial term that is coined for a process to spreading the payments over multiple periods.
Mortgage Amorization Calculator
Note: The tool calculates in USD. But to use it in your currency, just enter the amount and ignore the dollar symbol. Think like it is your native currency.
What is Mortgage Amortization Calculator
The Mortgage Amortization Calculator is a tool that will help you calculate the per month instalment value with the interest on the mortgage amount that you have to pay with the per month principal payment of the borrowed amount.
Meaning to say, Each time you make your monthly mortgage payment, that payment is split between paying interest and paying down principal (reducing your loan balance).
How does the Calculator calculates the amortization loan payments
Amortization is simply the process by which this you calculate the payment distribution of the loan amount. Though, Payment is not split the same way throughout the loan duration. Rather, it is different with each payment, with your earliest payments going primarily toward interest.
For example, let’s say you buy a $250,000 house, put 20% down, and take out a 30-year, $200,000 mortgage with a 4% interest rate. That means your monthly payment would be $955.
Understanding Amortization loan concept with an example
To calculate how much of that first payment goes toward interest, you simply divide the interest rate by 12 to get a monthly interest rate and multiply that by your outstanding loan. Here’s how it looks in this example:
- (4% / 12) * $200,000 = $667
That means $667 of your initial mortgage payment is used to pay off interest, while the remaining $288 reduces your mortgage balance to $199,712.
Next month the same calculation runs again, but this time with your slightly lower mortgage balance. That leads to a $666 interest payment and $289 going toward reducing your loan.
And that’s how it works. You pay interest on the early primarily, but over time it slowly shifts so that more and more of your monthly payment reduces your mortgage balance.