Until you look at the amortisation schedule, buying a home is an amazing thing. What's that? Why are there so many numbers? When you look at it, you might think that this can't be the amount of money that you will have to pay. It's the truth. But if you know what this payment schedule means, you can figure out if you can afford your loan, when it will be paid off, and how it will be paid off.
First, before you get your loan, you should take the time to figure out how the loan will be paid back. Even though it won't be exact, it will probably be pretty close to what you'll pay. A number of websites let you use an amortisation calculator to figure out how to do this. This calculator will figure out your payment schedule based on the numbers you put in for your loan amounts. It works in seconds and shows information that is very important.
How the amortisation schedule works
The size of the loan. This term refers to the amount of money you want to borrow to buy a home. This is not necessarily how much you paid for your home. Instead, it is the amount you plan to mortgage, minus any money you put down plus taxes and insurance. It is how much money you want the bank to pay you.
- The rate of interest. This number is important but hard to figure out. Many of the banks out there will give you a base number for the mortgage they are willing to sell you. But keep in mind that the interest rate can go up or down depending on when you buy it, how good your credit is, and what kind of loan you have (fixed rate or variable.) Put in the rate that's as close as you can get to what you'll likely pay.
- The length of the loan. This question is easy to answer. Here is where you tell the amortisation calculator how long your loan will last. It could be seven, ten, fifteen, or even up to thirty years. The cost of the loan will go up the longer you keep it, but your monthly payments will go down.
After you put in all of this information, the amortisation schedule will be shown. The purpose of this paper is to help you understand where your monthly payment is going and how much it will be. It will tell you how much of your monthly payment goes toward the principal, how much goes toward interest, and what the loan balance will be at each step. Lastly, it will tell you exactly how much you will pay for your home loan's interest and principal. Every homeowner needs to use the amortisation schedule to its full potential.
