Making Sense of Home Mortgage Calculator Amortization Methodology

Let’s take a quick minute to break down and explain home mortgage calculator amortization in easy-to-understand concepts, and the way front-loading of loans with higher interest costs can cause confusion, especially considering the seemingly uniform nature of monthly payments.

We’ve been saying over and over again that home loans are really a whole lot simpler than they initially appear. We’ve been telling you repeatedly that home loans are not complicated and that anyone can understand them well enough to make informed decisions regarding their own loan. And we’ve meant every single one of those words. But there really are some aspects of amortization that gets a little tricky, a little complicated.

Can you still understand these slippery concepts? Of course. But they do require a little extra in-depth explanation. And one of this tricky home loan subjects you might of heard about is front-loaded interest.

What is front-loaded interest and how does it impact the cost of you loan?

The Bank Makes Sure It Comes First

It shouldn’t come as much of a surprise to hear this, but the bank who lent you the money for your loan probably held a lot of the cards when the two of you agreed on the terms of your loan. Even if you came into your mortgage meeting or renegotiation with a lot of carefully calculated information about what sort of loan would best meet your needs there are still a few aspects of your home loan’s terms that your bank got their way. And one of those related to the spacing out of your interest rate.

Because here’s the thing- every mortgage calls for full amortization over its life. Which means every loan needs to be paid off in full by the end of your payment terms. So if you signed on for a $300,000 loan at a 5% interest rate with a 30-year term you’re going to end up paying off that $300,000 in full, plus interest, by the time that 30 years is done.

In order to figure out the minimum you need to pay every month to make sure that $300,000 + interest gets paid off within 30 years your banks will figure out how much of the principal you will pay off every month and how much interest you will pay off every month. The combination of your payment to your principal and your interest rate expenses adds up to your monthly payment.

A Shifting Balance

Common sense would state that the balance between interest rate and principal payment would stay the same over the life of your loan, that if you pay $1,000 to your principal and $1,000 to your interest one month you’re going to pay that same balance every month.

But this isn’t true at all. Banks front-load your interest for the first couple decades of your loan. Which means lots of people make their minimums like clockwork for the first 20 years of their 30 year mortgage and haven’t even paid off half their principal yet. The banks front-load interest because they love interest rate, it’s free money for them, so they want to make sure they get as much of it as possible, as quickly as possible.


This is one of the reasons it’s such a good idea to make extra payments every month towards your home loan. Extra payments go straight to your principal as long as you designate them to. The faster you lower your principal the less you’ll pay in interest during those unfairly front-loaded first couple of decades. Using a home mortgage calculator amortization tool to help determine just how much you’ll save is a great way to drive this point home and to figure out just how much extra you should contribute towards your loan every month.

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