Loan Amortization Schedule

Loan Amortization Schedule

Using a Loan Amortization Schedule to Save a Ton of Money

A loan amortization schedule or mortgage amortization schedule, or any kind of amortization schedule, table or chart all work the same. In each case, the schedule will show you how much principal and how much interest is paid after every payment of the loan.

The Good Part and Bad Part of a Payment

The principal part of payment is the good part because this part is how much of the loan you have paid off. The interest part is the bad part because it is how much money you've paid in interest. Interest, of course is wasted money because it doesn't help you pay down your mortgage.

To show you how to save a ton of money by using a loan amortization schedule we'll use the following example. A person takes out of $250,000 mortgage. His interest rate is seven percent and the term of the loan is 30 years. By using an amortization schedule or mortgage calculator we find that the payment for this mortgage will be $1,663.23. Each month, the person with this mortgage will be paying this amount.

By looking at the loan amortization schedule we find that after the first payment $204.19 has been paid toward paying off the principal of the loan. The rest of the payment is money that we have wasted on the interest charge.

Double the Principal, Make Fewer Payments

If we had paid double the principal due or, $408.38 for this first payment, we will have saved the interest that would be paid in the next payment. Not only this, but the savings will compound because it is that much less we to pay for the entire term of the loan.

In fact, if we add $204.19 to every payment for the rest of the mortgage, instead of the mortgage being paid off in 30 years, it would be paid off in 21 and 9 months. The amount of money saved over the course of the mortgage would be $111,542.74!

Formula for Savings

This is one way we can use a loan amortization schedule to help us save a ton of money on a mortgage. Simply use the amount of principal we pay toward the first payment and add that amount to each payment and the savings for any mortgage will be great.

If we wanted to use a payment breakdown calculator, such as Ezcalculator's payment breakdown calculator, we could pick out a principal payment for a payment a longer ways into the loan for instance, 48 months. If we decided to match this principal payment, which would be $269.38,we would be through paying the mortgage in 20 years and 2 months. Here, the savings are $131,991.49!

Looking at a loan amortization chart before you take out a mortgage can be beneficial if you're interested to look at how much you would have paid off of a loan at certain part of that loan. It can also be beneficial if you want to see how much interest you have paid, because this is important knowledge for tax purposes. However, one thing that is often overlooked is how you can use a loan amortization schedule to