Whether you’re a first-time homeowner or you’ve gone through the home loan process a few times before, figuring out your monthly loan repayments is never an easy feat.
Fortunately for you, there’s no shortage of free, online mortgage calculators to help you figure out how much your repayments will be each month. With this in mind, you can confidently go ahead with your loan and get a step closer to the home of your dreams — or look for a different option altogether.
However, not every loan calculator is created the same: Some might fall short when it comes to giving you all the information you need to make an accurate estimate, omitting key factors like property taxes, insurance, and amortization!
So, if you’ve been looking for a comprehensive, 100% FREE mortgage loan calculator with an amortization schedule, you’ve come to the right place! This guide has all you need to know to use it correctly and understand why loan amortization is so important to account for when looking for the best rates on the market!
How to Use Our Mortgage Calculator
So, how does our amortization calculator work, exactly?
For the most part, the way our mortgage calculator works is the same as most free online calculators you’ll find on the web: You start by inputting the mortgage amount, mortgage term, annual interest rate, and the number of regular payments expected for a fixed-rate mortgage.
These key factors make for the very basics of how mortgage payments are calculated. With this, you can get a rough estimate of what you can afford to borrow by determining the mortgage principal (aka the amount you have to borrow once you subtract your down payment) and adding the monthly interest rate and the number of payments (for example 30 years or 15 years).
Now, if you were to do these calculations by hand, the formula you’d need would look a little like this:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
In this classic formula, M stands for monthly mortgage payment, with P standing for the principal amount, i for monthly interest cost, and n for the number of payments required for your fixed-term mortgage to be completely paid off.
Amortization Schedule Calculator Example
For a more concrete example, consider this scenario: Your principal comes out at $400,000 after subtracting the down payment you’ll make, and your fixed interest rate (usually provided by the lender as the annual interest rate for the loan) is 5% with a 30-year term.
In this case, you’ll have to multiply the principal ($400,000) by the interest rate in decimals (0.05 for annual and 0.004 for monthly) and raise the total to the power of the number of payments (360).
This should give you a basic estimate of what you’ll need to repay without considering other monthly expenses such as HOA fees and taxes.
Don’t feel like getting pen and paper out and stressing over numbers? Well, no judgment there on our part: Our calculator will conveniently add up all these figures for you.
Once you’ve input all the details as accurately as you can, you’ll get a final figure that represents the principal and how much interest you’ll need to account for. This is good to review before you can close the deal on your next investment or next forever home, and you don’t have to do all the calculations yourself.
How our amortization calculator works
But what about amortization?
How are we able to easily calculate amortization as you’re determining your mortgage payments?
While we’ll explore what an amortization schedule is in more detail in the next section, here’s a brief explanation of how our loan amortization calculator works.
When you input your principal and interest, we automatically calculate the amortization schedule (meaning how much of the payment is going to interest payments and how much to the actual asset), showing you the total interest paid and how much principal is left to be paid.
On top of that, this tool will also show you how much total principal and interest will have been paid at a specified date, how much you’ll owe on the actual mortgage, without interest, at a specified date, and how much time off your term you can save by making one or more extra payments.
You’ll also be able to figure out how much equity you have.
Our calculator will work off your mortgage payment estimate and apply the current-year amortization chart to the total, so you can make adjustments for finding a better interest rate or even plan extra payments to speed up the payment of your home!
What Is Amortization and Why Do We Have to Pay It?
Being familiar with your amortization schedule is fundamental if you’re looking to get the most out of your investment property or residential home — that’s why we have included amortization in our mortgage loan calculator.
But what makes it so important, and what exactly does it entail?
In general terms, amortization refers to the repayment of a loan according to an agreed rate. In the real estate world, amortization is the rate at which you are repaying the principal on a loan.
A fully amortizing loan will be completely paid off by the end of the term (in most cases, after 30 years since it’s been taken out). A no amortization loan, on the other hand, will leave the principal unpaid, only paying off the interest rate on the loan within the 30-year or 15-year term.
Contrary to what you might think, amortization wasn’t always an integral part