An amortization schedule is a chart that shows the status of the mortgage loan after each payment. The schedule illustrates month how much of the mortgage payment is interest and how much is left to reduce to principal. The schedule also shows the outstanding balance of the loan after each payment.
Consider an example; prepare a amortization schedule for the first three months of the
for 30 years.
At first, calculate the monthly payment using the three steps
1. First find the number of
2. Using table locate the table factor, monthly payment per
The entry in the above table for
for 30-years is
3. Now, calculate the monthly payment
Therefore, the monthly payment is
Next, use this monthly payment to complete the amortization schedule.
1. Calculate the amount of interest for the current month using
is the current outstanding balance of the loan,
is the annual Interest rate and
2. Calculate the portion of payment used to reduce principal by using the formula below
3. Calculate the outstanding balance of the mortgage loan by using the formula below
Now, repeat the steps 1, 2 and 3 for two more payments
Therefore, the amortization schedule is
A chart that shows the month-by-month breakdown of each mortgage payment into interest and principal is known as a(n) amortization schedule.
Consider appraised value is
, lender percentage is
and balance of first mortgage is
Step 1. First find the percentage of appraised value
Step 2. Next, find the potential amount of credit available
Extra charges known as mortgage discount points are frequently added to the cost of a loan as a rate adjustment factor. This allows lenders to increase their yield without showing an increase in the mortgage interest rate. Each discount points is equal to
of the amount financed.
Consider an example, suppose a person is purchasing a
home. The down pay is
, and the balance will be financed with a 25-year fixed-rate mortgage at
Extra charges i.e. discount points the person has to give to the lender is
Mortgage discount points are an extra charge frequently added to the cost of a mortgage.