Amortization Schedule

Anyone in the market for a home loan will find that even the smallest requests can turn into rather large ones when you add in interest and fees over the life of that loan. To see exactly how it all adds up and where payments will go and what they will go on, many people like to use an amortization schedule to see the bottom line dollars and cents.

An amortization schedule is nothing more than a table that details the break down of every expected payment on a loan. This table shows how each payment slowly, but surely eats away at the principal while also paying off the interest, or the cost of the loan. A first payment on a loan amortization schedule, for example, might show almost the entire payment going on interest. As the loan matures, the scale tips in the favor of the principal going down more.

Using a monthly amortization schedule is a good way for a potential homeowner to see the real value of their loan to a bank or other lender. It's also a great tool for showing how extra principal payments can shrink a loan much, much faster than paying just the set amount each month. These schedules are often used to tout the biweekly mortgage payment plan that many financial planners like so much. Since extra payments target the principal, the result is less interest paid out and more money in a borrower's pocket. The benefits of using one of these schedules to calculate expenses and payments includes:

• Provides the facts in black and white. It's hard to argue with the numbers you crunch with an amortization schedule calculator. When the first few years' payments are going on nothing but interest, a look at one of these can help a homeowner see why extra principal payments can be rather smart and even bigger down payments.
• Allows for better planning. When some financial planners suggest their clients make extra payments, they get blank stares. The facts revealed in an amortization schedule make it plain to see why better financial planning and extra or increased payments can help eat away at a loan quicker. These schedules also can help a potential borrower see whether a loan is worth taking out at the interest rates being offered.
• Shows the value of having a lower interest rate. When a $100,000 loan with a 10 percent interest rate is compared with the same principal amount at 7 percent, the value of good credit becomes clear.

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