Amortization Schedule Explained
Amortization schedule, typically used to describe the payment schedule of a mortgage home loan through a schedule of systematic payments that are equal in value. The monthly payments are continued until the mortgage is repaid in full. This is particularly helpful in understanding how the PI (Principal & Interest) in the PITI (Principal, Interest, Taxes & Insurance) breaks down month to month and starts to change with more going towards the principal at the later stages of the loan. Very eye opening.
An amortization schedule is typically displayed in a chart or as a list that depicts each payment. The payments are broken down into the portion that is allotted to go toward the principal balance of the mortgage and the portion that goes toward the interest. An amortization schedule lists each payment throughout the entirety of the life of the loan.
An amortization calculator can be used to calculate the monthly mortgage payments or amortization schedule. In order to use the calculator, the borrower must input the following pieces of data:
-length of the term of the mortgage in years
-down payment which sets the initial principal balance
The starting date of the payments should also be noted for an accurate depiction of the payment schedule. Typically, this defaults from the date that you’re running the calculation.
The amortization schedule can be looked at as the complete payment schedule for the mortgage. With this schedule, an individual can calculate how much of the principal balance has been paid off at any given point in time. Typically, amortization schedules include a running tally of the mortgage balance.
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