Is Understanding Amortization Enough?

Article Posted by Expert Author: Sam Stieler  on 10/04/2012

It’s easy to understand the basics of how mortgages work but it can be tricky to understand some of the finer points of these big, important loans. Using home mortgage calculator amortization to figure out how much you will pay over the life of your loan is a good idea but it doesn’t quite get at the full truth of your loan’s balance between principal payments and interest payments.

 

What Consumers Often Miss

 

Seeing as minimum monthly mortgage payments tend to cost exactly the same every time your statement finds its way to your mailbox you’re forgiven for assuming the balance between principal and interest payments is the same every month. But it actually isn’t. Banks front-load the interest rate payments on a mortgage over the first 1-2 decades of the life of a loan.

 

In order to fully understand the full picture and the importance of paying off your home loan as quickly as possible you must understand how front-loaded interest works.

 

The good news is you can learn about how lending institutions configure loans in order to understand how to tweak your budget to make sure you maximize your savings.  Using a good home mortgage calculator is a good strategy for looking at various loans that you may have access to you.


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