MORTGAGES

An amortization schedule shows how much of your monthly payment goes to interest and how much is left to pay off the principal, or the amount you actually borrowed, which is decreased with each payment you make. The monthly payment is calculated so that it will pay off the entire principle amount over the desired length of the loan, or term. For mortgages the payment is rounded up to ensure that the loan is totally repaid within its term. To calculate an actual amortization schedule for your mortgage, or one you are considering, hit the amortizarion schedule button below. You can then print out the schedule, or try different assumptions for the interest rate, amount of loan, and term.

The interest amount due is figured by multiplying the monthly interest rate factor times the outstanding principal each month. This interest payment is then subtracted from the regular payment and the remainder of the payment is used to reduce the principal. As you will see from your amortization schedule, in the early years of the loan, the interest portion of the payment is much larger than the principal portion of the payment. During the later stages of the loan this process is reversed and the payment to principal is larger than the interest payment. That is why many people make additional principal payments during the early years of the loan, since it not only reduces the total amount of interest they must pay on the loan but also shortens the term.

CONSUMER LOANS

Consumer or installment loans are made for a variety of reasons, including home improvements or a special purchase. They are usually made for smaller amounts of money than mortgages and also for shorter terms. Where a mortgage lender holds a lien on the building being financed or the vehicle in an auto loan, a consumer loan is backed only by the ability of the borower to repay the entire loan over time. That is why the interest rate may be higher on a consumer loan.

SAVINGS GROWTH & INVESTMENTS

The effect of compound interest on an investment over time can be very powerful. The hardest part of investing is often just getting started, since the initial increases seem so small when compared to the final goal. But over time, consistant early investments will turn into a large nest egg. That is why so many financial advisors urge their customers to start early, when small investments have the ability to grow into college educations and retirement funds. Use this Financial Goal Calculator to try some different variables to see just what it takes to reach your personal goals.