Amortization – this word is used to describe the accounting process by which most buyers will repay their home loans over time. Most home buyers will be set up with an amortized mortgage.
The benefit to an amortized fixed-rate mortgage is that your payment will remain the same over the entire term of your home loan. Allocation percentages of that payment toward principal and interest however will change. Making the initial payment requires that more of the payment go to pay the interest on the mortgage than the principal. But as you lower your principal the amount of interest charged lessens. In turn you eventually start paying more on principal and less on interest.
A trick to paying less interest on the loan comes from making additional principal payments on your mortgage loan. After you make the primary monthly payment, if you can pay any additional money on just principal it will save you a lot of money in interest payments over the course of the loan.
If you make normal payments each month and make them on time, your loan, principal and interest, will be completed paid off at the end of the term.
I have provided you with an example below of a mortgage situation of $200,000 loan at 3.25 percent over a 30 year term. This loan’s fixed payment is $870.41 of principal and interest. Now $541.67 of that initial payment is interest and what is left over gets applied to principal. The unpaid balance then drops to $199,671.25. On the next payment the interest is lower since the principal has dropped so more money is applied to the principal and so on until the loan is paid in full.
Your Lender or bank institution where you borrowed your mortgage loan has amortization schedules available to you on your loan. Most of the time you can find them online under your services or you can ask your Lender to send you one. Schedules are also easy to create using a spreadsheet program. All you need is some basic information like what is contained in my example above.
If you are looking to buy a Fairfax home for sale I can set you up with a professional Listingbook account. This will allow you to search the MLS from your own pc. I can also refer you to Lender or Mortgage professionals that can get you pre-qualified and explain in detail about the amortization process. Contact me today!