Advanced Mortgage Calculator
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Your Monthly Payment
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Amortization Schedule
| Month | Principal | Interest | Total Payment | Remaining Balance |
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What is a Mortgage?
A mortgage is a specific type of loan used to purchase or maintain a home, land, or other types of real estate. The borrower agrees to pay the lender back over a set period, typically in a series of regular payments that are divided into principal and interest. The property itself serves as collateral to secure the loan. If the borrower stops making payments, the lender can take possession of the property in a process known as foreclosure.
How to Use This Calculator
Our Advanced Mortgage Calculator is designed to give you a clear picture of your potential mortgage payments and total costs. Follow these simple steps:
- Property Price: Enter the full purchase price of the property you're interested in.
- Deposit: Input the total amount of your down payment. The calculator will subtract this from the property price to determine your total loan amount (principal).
- Annual Interest Rate: Enter the annual interest rate offered by your lender. Don't include the '%' symbol.
- Loan Term: Specify the duration of the loan in years (e.g., 15, 25, 30).
- Repayment Type: Choose between 'Principal & Interest' (the standard repayment type where you pay down the loan balance) or 'Interest Only' (where for a period, you only cover the interest cost, and the loan balance doesn't decrease).
- Calculate: Once all fields are filled, click the "Calculate" button to see your results.
Example Calculation
Let's say you want to buy a home for $500,000. You have a $100,000 deposit, leaving you with a loan amount of $400,000. You secure a 30-year loan term at a 3.5% annual interest rate. By inputting these values into the calculator, you'll find that your monthly principal and interest payment would be approximately $1,796. The calculator will also generate a full amortization schedule showing your loan balance decreasing over the 30-year term.
Formulas Explained
The standard formula for calculating the monthly payment (M) for a 'Principal & Interest' mortgage is:
M = P [ r(1+r)^n ] / [ (1+r)^n – 1 ]
- P: The principal loan amount (the amount you borrow).
- r: Your monthly interest rate (your annual rate divided by 100, then divided by 12).
- n: The number of payments over the loan’s lifetime (the term in years multiplied by 12).
For an 'Interest Only' loan, the calculation is much simpler: M = P * r.
FAQs
- What is a mortgage?
- A mortgage is a loan from a bank or lender that helps a borrower purchase a home. The property itself serves as collateral for the loan.
- What is an amortization schedule?
- An amortization schedule is a table detailing each periodic payment on a loan. It shows how much of each payment goes towards interest versus principal, and the remaining balance after each payment.
- What is the difference between principal and interest?
- Principal is the amount of money you borrowed. Interest is the cost of borrowing that money, charged by the lender as a percentage of the principal.
- Does a lower interest rate save a lot of money?
- Yes, even a small reduction in your interest rate can save you tens of thousands of dollars over the life of a long-term loan like a mortgage.
- Can I pay off my mortgage early?
- Absolutely. Making extra payments towards the principal can significantly shorten your loan term and reduce the total interest you pay. However, check with your lender about any prepayment penalties.
- What is an 'Interest-Only' mortgage?
- An 'Interest-Only' mortgage is a type of loan where you only pay the interest for an initial period. This results in lower initial payments, but you aren't reducing the loan principal. Your payments will increase significantly once the interest-only period ends.
