Plan your home financing and see the impact of extra payments
A mortgage is a loan used to purchase real estate where the property serves as collateral. The borrower makes regular payments that cover both principal (the original loan amount) and interest (the cost of borrowing). Mortgages are typically long-term loans (15-30 years) with fixed or variable interest rates. Understanding your mortgage amortization schedule is crucial for financial planning as it shows how payments are split between principal and interest over time. Early payments primarily cover interest while later payments reduce principal faster. Extra payments can significantly reduce total interest paid and shorten loan term.
Monthly Payment Formula:
M = P × [r(1+r)^n] / [(1+r)^n - 1]
Where P = loan amount, r = monthly rate, n = total payments
Amortization:
Interest = Balance × Monthly Rate
Principal = Payment - Interest
New Balance = Old Balance - Principal
Each payment reduces balance and interest portion decreases over time
Extra Payment Impact:
Savings = Extra × [(1+r)^(n-k) - 1] / r
Where k = remaining payments, r = monthly rate
