As homeowners begin to make payments on their mortgage, their home loan begins to mature, a process known as amortization. With an amortization schedule, homeowners will know exactly how much money is going towards both interest and principal for the loan’s full term.
An amortization schedule can help homeowners pay off the debt in equal payments with varying amounts towards the interest and principal, determined by the amortization schedule. In addition, understanding this schedule can give homeowners the peace of knowing where exactly their money is going.
An amortization schedule shows information that includes principal, interest, and the remaining principal balance on the mortgage. And most importantly, the amortization schedule helps borrowers see the home’s total cost, including interest.
During the first few years of the home loan, most of the money goes toward interest, and as the loan matures, more of the payment goes towards principal and less toward interest.
To see amortization schedules based on different criteria, use our online Mortgage Calculator, click “Calculate,” and the amortization schedule will pop up.
Build Equity in Your Home
As homeowners pay off the mortgage and their home value increases, they begin to build equity. As equity increases, the principle and interest begin to decrease.
As more money goes towards paying off the principal balance, occasionally paying an additional principal payment can save homeowners thousands of dollars down the road.
Refinancing the Home
There are many reasons for homeowners to refinance that will result in saving money. When considering whether to refinance a home, comparing the current mortgage amortization schedule with the proposed refinance mortgage schedule can help homeowners visualize the potential savings.
If a homeowner can refinance to a rate that is 1% lower, the savings can be in the thousands over the course of the loan. So whenever mortgage rates are dropping, it’s beneficial for homeowners to review their amortization schedule and shop for mortgage refinancing regularly.
Homebuyers can often save money by reviewing the amortization schedule of prospective mortgages to make money-saving choices. Then as homeowners, regularly reviewing the amortization schedule and watching for mortgage rates to drop can also result in substantial savings.
Whether you are a homebuyer or a current homeowner, we would appreciate an opportunity to help you save on your mortgage. Many of our clients take advantage of historically low mortgage rates by either purchasing a home or refinancing their existing mortgage.
Marimark Mortgage is based in Tampa, Florida, and serves the mortgage needs of homebuyers, homeowners, and investors in Florida, Virginia, and Pennsylvania.
We specialize in mortgages for first-time homebuyers, conventional home mortgages, refinance loans, reverse mortgages, and FHA, VA, and USDA mortgage options. In addition, we’ve worked extensively with cash-out refinancing and help clients lower their monthly mortgage payments.
Updated on 7-6-2021