Loan Amortization Calculator
How to Use a Loan Amortization Calculator to Make Life Changing Money
Imagine paying off a 30 your mortgage in one-half or even one-third the time by only adding a small amount to each monthly payment on your mortgage. This certainly can be done when you know how to use a loan amortization calculator. Knowing how to use a loan amortization calculator can get you out of debt quickly and let you start investing those monthly payments you no longer have to make. Several years of doing this could, potentially, make you some real big money! Right now, were going to find out how to do just that.
A loan amortization calculator breaks down your monthly payments into two parts, interest and principal. Some loan amortization calculators will show these two parts as a running total. In other words, if you pay $200 principal the first month and $201 principal the second month, the second month's entry will show $401.
Other calculators will simply show each month. For instance, month one, $200 and month two, $201, etc.. Some loan amortization calculators call this second type of loan amortization calculator, a payment breakdown calculator. The calculator on this site you are on now, FreeAmortizationSchedule.net , gives you all the above information and it is this calculator we're going to use to show you how to pay off a mortgage very quickly.
Other than principal and interest, when we make our mortgage payments, our lender collects escrow from us. Out of this escrow account the lender will pay our homeowners insurance and our city or town property tax. When we use a loan amortization calculator we ignore the escrow part of our payment and simply deal with the part of the payment that goes to the lender.
Don't get stuck on this point. I just bring it up because we are going to calculate your monthly payment and if it comes out to be $1,5000 per month and you are paying $1,800 per month, you will understand where this difference comes from.
After we enter the amount borrowed, the interest rate and the length of the mortgage, into the calculator we then click the calculate button. Not only will the free amortization calculator tell us our monthly payment, it will also calculate a complete amortization printout.
If the mortgage we are calculating happens to be a $200,000 mortgage for 30 years at 7 percent, we will notice our monthly payment is $1,330.60. The first month's payment is broken down into$163.93 for the principal and $1,166.67 for the interest. When we look down to the second month we find that the principal is $164.89. If we were to pay this payment with our first payment we wouldn't have to pay the interest on this second payment. By looking at the loan amortization schedule we find that amount money we will save by doing so will be $1,165.71.
That is amazing return on our money! In one month we saved over 500% on a $164.89 investment. We may even choose to look down to the third payment and make this payment as well. This way we would be paying another $165.85 and we would be saving an additional $1,164.75. If we did this all the way down the line, making three principal payments with each payment, we would be paying a relatively small amount of extra money with each payment but we would have our mortgage paid in 10 years!
However, even if we can only make two principal payments each month, we still would be paid off in half the time. Now, for the next 15 years of our life, instead of paying out $1330.60 each month, we could be investing this money in a mutual fund. By doing this we would truly be able to make some life changing money.
Here is the fact. If someone takes $1,330.60 and invests it each month in a mutual fund, which gives an 11% return, after 15 years he would have $612,966.39! While it is true, 11% isn't a guaranteed rate of return, it isn't unheard-of either. Sometimes mutual funds give you 20% plus returns. We don't want to get carried away but it is still important to know about this. As you can see, by using a loan amortization calculator can we gain the basic knowledge we need to know to implement this very lucrative strategy.