Manual Mortgage Calculation
Computerized forms allow you to input your mortgage loan details and show your full amortization table. An amortization table shows how much of each mortgage payment goes to paying interest cost and how much goes toward reducing your loan balance. If also shows how your loan balance drops over time as you make more payments. You can also manually calculate your amortization schedule.
Other People Are Reading
-
Features
-
If you have a mortgage, you usually know how much your initial payment is. You also know your mortgage loan amount and your interest rate. In this calculation, you will find out which portion of your payment goes toward paying interest and which portion reduces the loan. You will also find out how your mortgage balance decreases each payment. You will calculate these figures with each payment, so you may have to make a long series of manual calculations if you have a long loan term.
Payment Schedule
-
Your lender requires you to follow a certain payment schedule. You may make your mortgage payment weekly, bi-weekly, bi-monthly or monthly. You make 52 payments each year on a weekly payment schedule or 12 payments each year on a monthly schedule. If you pay bi-weekly, you make 26 payments per year. If you pay bi-monthly, you make 24 payments per year. Your interest rate is an annual rate, so you have to divide your interest rate by the number of payments you make per year before doing these calculations.
-
Principal and Interest
-
In a conventional mortgage, each payment goes toward paying interest and reducing principal, which is your outstanding loan amount. Your payment first covers the interest and the remainder goes toward your principal. To calculate the interest amount, multiply your interest rate by your loan balance. For example, if your loan balance is $100,000 and your monthly interest rate is 0.5 percent, your interest is $500 (from 0.005 * $100,000). If your payment is $700, then $200 goes toward the principal.
Balance Reduction
-
Every time you make a payment, your loan balance drops a little. After the payment in the above example, your principal balance becomes $99,500 (from $100,000 - $500). The next payment, your interest portion becomes less. Using the same example, it would be $497.50 (from 0.005 * $99,500). If your payment is still $700, then $202.50 goes toward your principal. As you make more payments, a larger portion of each payment goes toward your principal.
-
References
- Photo Credit Jupiterimages/BananaStock/Getty Images
