Amortization Chart

You will receive an amortization chart when you sit down with your mortgage lender to discuss the terms of your loan. The chart provides information about how long it will take to pay off your loan.

First time homebuyers can learn a lot by studying amortization charts.

The chart usually consists of six columns, which contain the following information:

1. Payment amount – This is how much you can expect to pay on your mortgage each month. If you have a fixed rate mortgage, it will not change. It can vary widely if you have an ARM depending on how your rate adjusts.
2. Interest – This is not your interest rate, but rather how much of each monthly payment goes toward paying the interest on your loan. During the first few years of your loan, it will be very high but it will gradually get lower.
3. Cumulative Interest – This is the total amount of interest you will have paid at each point.
4. Principal – This is the amount of money that goes toward the actual loan amount. In other words, these are the payments that go toward building equity.
5. Principal Paid – This is like cumulative interest but applies to your principal payments instead. It gives you an easy way to determine how much equity you’ll have in your home at any given time when additionally taking the market value of the home into consideration.
6. Balance – This is simply how much more you have left to pay on your loan.

Sometimes the data from the amortization chart is also plotted on a line graph with the x axis representing time and the y axis representing the dollar amount. These graphs have three lines:

• One for balance that starts off high and gradually drops over time
• One for cumulative interest that curves upward and then dips
• One for principal paid that dips at first but then heads steadily upward

This graph can help those who are more visually inclined understand how the mortgage payment process works. It can be simpler to explain than just a list of numbers. Note that some charts have a line for payment instead of for balance. This line is usually straight across at the top of the y axis.

It can be difficult to understand what an amortization chart is without actually seeing one. There are several online sites that offer good examples of what they look like. A few are:

• Vertex42.com provides examples of both the traditional amortization chart and the line chart. It also lets you download a template to Excel so you can create one with your own numbers.
• Publicrecord.com gives you a blank chart with a little something extra. You fill in the first row of data and the site will fill in the rest of the chart for you automatically.
• The Federal Reserve Board’s site has an image of an amortization bar chart that gives another visual take on the difference between principal payments and interest payments.

There is also software available for purchase that lets you plot any number of amortization charts. Pine Grove Software has a package called AmortizeIT!, Slateboard Software has a program called QuickCalc and Amortization Solutions has a program called Amortization Schedule Calculator. There are also dozens more programs like these. If you’re looking to purchase one, visit your local computer software retailer or look for them online.

These charts are more useful when combined with mortgage calculators. Using the two in tandem is a great way to compare several types of mortgage loans before you make the big decision to obtain a mortgage loan.

• Rent to Own By Owner
• List of Popular Mortgage Companies
• FHA Loan Guidelines

• FHA Mortgages and Home Inspection Requirements
• Help for Single Moms to Buy a House
• Escrow
• FHA Debt to Income Guidelines
• Free Home Inspection Forms

• LIBOR Chart
• Amortization Tables Free
• How to Create an Amortization Table
• Mortgage Amortization Table
• Amortization Schedules Free