How Mortgage Calculators Help to Understand Amortization

While talking about your mortgage with your loan officer or broker, you must have seen them flashing out a strange kind of calculator and finding out several things about how your loan would shape out to be in future years. If you were seeing such a calculator for the first time then, naturally you might have been intrigued by this gizmo. At the same time you must have wondered what kinds of information this special calculator can show.

Actually, what you saw was a mortgage calculator. This calculator is used specifically in the mortgage industry. The calculator has been invented solely for the purpose of calculating payments on a mortgage. That is why you do not see them anywhere else. By inputting information like total amount of loan taken, the number of years, the rate of applicable interest, etc., the calculator can find out how much the borrower will have to pay each month. When the information of all the months is displayed together, we get what is famously known as an amortization chart. For those uninitiated, amortization is the technical name for paying back the mortgage in small installments month after month.

Most consumers feel that they do not need the mortgage calculator, since they will only be making the payments that are due to them. So they might largely ignore the calculator when the loan officer uses it. But if you are one of those wise loan payers who is interested in knowing how the repayment schedule will be throughout the active loan period, then the mortgage calculator might be quite an indispensable tool to use.

Generally mortgage calculators will show the normal amortization schedule which shows the monthly mortgage payments with all the interests accrued on the loan in the last thirty days since the last payment as well as a portion to be applied to the original principal balance of the home mortgage. This helps the borrower to be timely in making the payments and hence build up a good amount of equity on the home.

The best part of the mortgage calculator is that the borrower doesn’t need to be proficient with the mathematical formulae that apply to the amortization schedule. The formulae are all programmed into the calculator. But a general overview of the amortization process must be clear in the mind. This will help the borrower to make a careful strategy in paying off the mortgage. Borrowers might also be able to alter their mortgage repayment schedules and thus save money.

The mortgage calculator can also show how much money the borrower can save by controlling the loan in different ways. One of the ways is to make a larger down payment in the beginning. Even if you pay a lump sum off your balance at the end of every year, you might be saving a good amount at the end of the mortgage. Hence, using a mortgage calculator can actually help you save money.

There are also many mortgage calculators available online. These are free and you can use them as a learning tool. A search would show you several good mortgage calculators that you can use. Almost all websites that deal with the mortgage business have a calculator on them, which are freely available to use.