Are you unsure what the exact amount will be that you’ll have to pay back with the duration of your loan? Well, an amortization schedule can get you up to speed, especially if you decide to change your payment amount. This schedule will ultimately determine how long or short your mortgage term is. With an organized table format, you’ll get a great visual of the exact amount owed, how much you’ve already paid off, and how long it will take to fully pay. Keep reading to find out the great benefits of using an amortization schedule.
One essential thing that all homeowners need to do is to pay their mortgage on time. You also need to know the amount due and how much it actually subtracts from your total mortgage. An amortization schedule assists with both of these tasks by showing you the effects of paying on time, missing a payment, and paying more than required. Of course, as you get deeper in your mortgage the total interest decreases while the principal balance decreases. However, from the start you’ll pay a higher interest and a smaller principal. As you begin making payments, the schedule depicts how much you owe and the amount of years it’ll take to pay it off. If you can setup your finances to pay on time and pay a bit extra, you will be in a much better position for paying off your mortgage and saving some cash.
As mentioned above, it is possible to create a shorter mortgage term. Some people that are really good with financing and can budget very well often decide to make a couple of payments (interest and principal) at the same time. While this does not decrease the amount due for a while, it does lead to a shorter mortgage term and usually saves a lot of money in the long term. Let’s say one year you planned to pay a huge lump sum for your mortgage. An amortization schedule will help you calculate the effects of this increase in payment. You can get a breakdown of how this knocks off some years from your mortgage. For those that want to get out of debt quicker, this is certainly a way to go. However, you should really think things through before committing to such a responsibility. Remember, you never know if your job situation can change or an accident can cause a big medical bill. In that case, it is best to put that extra money into a savings account rather than a mortgage, or even a little of both. If you have some extra money saved up you will have something to fall back on should you enter into a major financial bind– it’s better to be safe than sorry.
Learn how the amortization tables work
One of the great things about looking at an amortization table is seeing which options you have available when it comes to your payments. Here are three possible tables a lender uses to figure out your repayment schedule:
Spitzer amortization table– it provides the monthly fixed rate but there are certain changes regarding the decrease or increase in interest amounts throughout your loan.
Bolt amortization table– you pay mainly interest at the beginning and the principal balance a bit later in the loan.
Equal capitol table– calculates everything on a fixed monthly payment period. As you reach the end of your mortgage, the payments decrease.
Your lender may have one or all of these particular options available. Use the amortization schedule in addition to a mortgage calculator to find out how to best go about your mortgage, so that you aren’t paying a ridiculous amount of interest for 30 years.
Not only should you find out the different options a lender has for your schedule, you should also check for yourself to see what works well for you. What is the best option that will help you pay off your mortgage quicker and give you some stability? It’s a bit difficult to pay huge extra payments on a regular basis, especially if you get yourself in an emergency situation. A lender can help you decide on a doable situation that does not require you to reach deep in your pockets. But remember, even a little bit extra towards your mortgage can mean big savings. With a schedule you’ll be able to weigh the pros and cons of a fixed or adjustable rate and learn how it ultimately affects your mortgage.
Having an amortization schedule is extremely useful to keep track of all your information in the mortgage. Take advantage of this tool to see how an extra payment can make the total payment period shorter, or how each rate type affects your principal. See what different lenders have to offer and begin planning to help save you thousands of dollars near the end of your mortgage term.