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What is a Loan Amortization Schedule?
Loans are a part of many people's lives. The typical loan, especially the mortgage kind, is amortizing, which means that the principal balance is paid down through payments throughout its life. A loan amortization schedule is a common tool that borrowers use to keep track of how much of the principal balance they have paid so far. Some people make their own schedule using computer programs, while others obtain one from the Internet or from their lender.
A few crucial details are needed to have an accurate result in a loan amortization schedule. The loan amount, annual interest rate, and number of years that the loan will last are typically the first numbers that are put in. The payment frequency and compound period, which are both typically monthly, are also needed. Most amortization schedules also allow space for users to note the months in which they pay an extra amount toward principal.
The typical loan amortization schedule offers a summary of the interest paid, and the number of months left on the loan, to name a few items of information. Many amortization schedules allow users to put in the numbers for loans that are not common. For example, some schedules also work for loans that are paid bimonthly, quarterly, weekly, or some other frequency, instead of just monthly. There are so many schedules available that most borrowers can find what they are looking for quite easily, no matter their circumstances.
Some people use a loan amortization schedule before they even obtain the loan, which can allow them to see just how quickly they can pay it off. This is because many amortization schedules allow the numbers that are input to be manipulated. Borrowers can find out how longer terms, bimonthly payments, and extra payments toward principal can affect what they pay in interest in the long run. Of course, other factors can usually be changed on schedules, as well.
Most people can get a loan amortization schedule from their lender, while others might find calculators online that offer the same or other features. Some borrowers prefer to make their own, either through special computer software, or with templates to use on standard spreadsheet programs. For those creating their own schedules, formulas that can create accurate results can be found for free online. Since many formulas are difficult for the average borrower to follow and apply, however, it is often easier to find a reputable schedule on a lender's website.
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Discussion Comments
Any time I have bought a different house or refinanced my loan, I always ask for a mortgage loan amortization schedule.
Years ago, this wasn't as easy to get your hands on as it is today. I used to rely on the lender to give me a copy.
At times, I have even went through by hand and figured it out. The biggest reason I like to have a copy of this schedule is because of the information it gives me.
When I see how much faster I can pay off my loan, and especially how much I can save in interest, that is a lot of motivation for me to make extra payments when I am able to.
Today this information is so easy to find online. There are several sites where you can plug in the numbers and this will figured out for you.
It is nice to be able to play around with these numbers myself without relying on someone else to always give me the information.
@Sunny27 - What the loan amortization schedule also shows is that making extra payments in the early years is really beneficial, because most of your mortgage payment then is going to interest because the principal is so high. As the principal gets chipped away at, the interest goes down and more of the payment can go to the principal.
It's not a fifteen-year mortgage or a thirty-year with nothing in between. You can get a thirty year mortgage but still make extra payments when you have the money. The difference in the interest rate is usually not that great. If you have the discipline to really make the extra payments when you can, then doing a thirty year mortgage will give you more flexibility.
Of course, not many people have that discipline to not spend any extra cash they have!
@Suntan12 - These calculators are also good to use if you are buying a home and wanted to see what your estimated payments would look like. Bankrate offers great home loan amortization schedule calculators.
It is amazing when you see that the first few years of the loan you are only making interest payments. This is why a lot of financial experts recommend the fifteen year mortgage if you are able to make the payments because most people don’t realize the amount of interest that they are paying until they see a home loan amortization schedule in detail.
I used a mortgage amortization schedule calculator that I found online when I wanted to pay off my home. It is really great to play with a tool like this because you can calculate the exact payoff date.
For example, if you wanted to pay off your home in five years or 60 months, you could plug this in and the calculator would tell you what your monthly payment would look like and when the payoff would be based on that figure.
You can also figure out the payoff by simply adding more to the monthly payment and see how long the payoff takes. If you are serious about paying off your home, I highly recommend doing this exercise and printing out the loan amortization payment schedule so that you can stay motivated with your goal.
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