1. What is Mortgage Amortization?

Mortgage amortization refers to the process of paying off a mortgage loan over time through regular payments. Each payment covers both interest and principal, with the proportion changing over the loan term.

2. How Does the Calculator Work?

The calculator uses the mortgage amortization formula:

Where:

• \( PV \) — Present value or loan amount (USD)
• \( PMT \) — Regular payment amount (USD)
• \( r \) — Periodic interest rate (decimal)
• \( n \) — Total number of payments (unitless)

Explanation: This formula calculates the present value of a series of future payments, accounting for the time value of money.

3. Importance of Mortgage Calculation

Details: Understanding mortgage calculations helps borrowers compare loan options, plan their finances, and understand how much of each payment goes toward principal vs. interest.

4. Using the Calculator

Tips: Enter all values in the specified units. For annual rates, divide by 12 for monthly payments. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between principal and interest?
A: Principal is the loan amount borrowed, while interest is the cost of borrowing that money.

Q2: How does changing the payment frequency affect the loan?
A: More frequent payments (e.g., biweekly instead of monthly) can reduce total interest paid and shorten the loan term.

Q3: What is an amortization schedule?
A: A table showing each payment's breakdown into principal and interest, and the remaining balance after each payment.

Q4: How do extra payments affect amortization?
A: Extra payments reduce the principal faster, decreasing total interest and potentially shortening the loan term.

Q5: What's the difference between fixed and variable rate mortgages?
A: Fixed rates stay the same for the entire term, while variable rates can change based on market conditions.