Amortization Calculators Assist in Selecting a Mortgage

By Karen Lawson
Calculators for Mortgages Columnist

Email this Article | Format for printing

Mortgage lenders have developed a variety of mortgage calculators to assist borrowers in identifying and selecting an affordable mortgage that suits their current financial situation and future goals. These calculators are free, and can help you estimate factors such as how much you can afford to spend on a home, how much you can afford for monthly mortgage payments, and the impact of interest rates and mortgage types on payment amounts and how long it takes to pay off your mortgage. It's important to remember that mortgage calculators are designed to provide estimates, and results can vary according to how each mortgage calculator is programmed. For this reason, results from online mortgage calculators can vary.

Understanding Amortization is Key

An amortization schedule demonstrates how payments of principle and interest (P&I) are applied to a mortgage loan. This means how much of each payment is applied to P&I. Homeowners are often surprised to see that very little of their payments are applied to principle (the amount borrowed) each month during the first years of making payments. It's possible to save thousands of dollars over time by prepaying your mortgage, or selecting a mortgage with a shorter term. Depending on your financial circumstances, it may be more worthwhile to pay off high interest rate consumer debt, or maximize your retirement savings. A financial advisor can help you determine whether or not to prepay your mortgage. If you're considering getting a new mortgage or refinancing, amortization calculator tools can help you compare mortgage products. You can estimate payment amounts and remaining principle balance after payments are applied. This can help you see how adjustable rates, negative amortization, and interest only payments compare to a traditional fixed rate mortgage with full amortization.

Source
Fannie Mae



About the Author
Karen Lawson is a freelance writer with extensive background in mortgage banking. She holds BA and MA degrees in English from the University of Nevada, Reno.