The estimate from an amortization calculator may also be off due to a difference in how the calculator handles fractions of a penny and how your bank or lender handles such small amounts. The calculator is an excellent tool to utilize in order to see what your monthly payments may look like and to see a rundown of how these payments and how interest will act on the principal over the life of the loan, but it should be kept in mind that it is only an estimate.
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Other calculators breakdown the principal and interest after every payment throughout the loan or can show that one extra yearly payment can decrease the interest paid over the life of the loan from $209,263 to $160,025 and the average monthly interest from $581 to $444.
Most amortization calculators work in this way: If you are buying your home for $160,000, and putting $10,000 down, your loan amount is $150,000. With a 7% fixed interest rate on $150,000 loan, your monthly payments will be $997. Some calculators can also tell you the following: the total interest on such a loan would be $209,263, the interest paid in the first year will be 10,451, in the second it will be 10,341, and monthly the average interest paid will be $581.
The more information an amortization calculator gives you the more effective it will be. You can use this information to decide whether a longer term, a larger down payment, or an extra yearly payment is right for you. Use our amortization calculator to help you learn more about your new mortgage or apply online to contact a mortgage expert.