A 30 year amortization table can provide individuals with a clear idea of how their mortgage will be structured. It aids both the current homeowner and the soon-to-be buyer. While the table is simple to read and use, calculating it is quite difficult.
How a 30 Year Amortization Table Is Calculated
A variety of complex calculations go into the process of creating an amortization table. It is difficult for an individual to calculate such a table on their own. There are various amortization calculators available to use, without cost, that can produce this type of table within seconds.
To use them, you will need to provide the loan amount, interest rate and the repayment period, or the length of time the loan will be held for. From this basic information, the calculator will develop a large table that outlines how the mortgage will look throughout the 30 years of the loan. Utilize the amortization table at Bankrate.com to help you to bring up this table.
Learning the Details of a Mortgage
Using the table produced, you can discover a variety of information about the loan.
- Interest Payment: The interest payment made per month is listed on the amortization table. This is the amount of each payment that will be applied to the interest of the loan. At the bottom of the chart there is also a total of the interest paid for the loan.
- Principal Payment: The amount of each payment made per month that is applied to the principal is listed. The principal is the amount of money initially borrowed to purchase the home. At the end of the table, there will be a total listed for the principal payment which should be close to the amount borrowed to buy the property.
- Payment Amount: The monthly payment is calculated and displayed. If you currently have a mortgage, this amount should match -or be close to- the amount of your monthly mortgage payment.
These three main details of the loan are critical. For those shopping for the right mortgage loan, the amortization table shows just how costly or affordable it can be. It is a great way to determine if a lower interest rate, a shorter term, or even a longer term is right for you.
Key Benefits of Amortization Tables
There are many ways to take advantage of the amortization table to help you to see just how you can make the loan more affordable. If the number at the bottom of the interest paid column is too high for you, there could be ways of reducing costs.
- Consider Additional Payments: Use the amortization table to see what could happen if you make additional principal payments on the loan. For example, if you have a $150,000 loan at 6 percent interest for 30 years, your monthly payment will be $899.33. If you add an extra $50 payment to the loan payment each month, you knock off four years from the loan repayment time. You also save $26,673 in interest payments.
- Change the Term to Less: Use the amortization table to help you to determine if you can afford a shorter repayment term, which would cut interest payments down considerably. Using the same terms as the above example, if you cut the term on the loan down to 20 years you will have a monthly payment of $1074 per month. For this lower amount of repayment time, you will save $65,842 in interest payments. That is a signification savings for just $175 extra a month.
A 30 year amortization table can help you to clearly see how much you will pay for a loan. Change the loan terms to a longer period, perhaps a 40-year loan, to see how much lower your monthly payment will be. You can also find out what the difference in interest will be if you select a loan just a few fractions of a percentage different from another loan you are considering.