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Using an Amortization Schedule to Compare Loan Offers

By Sybria White on November 23, 2010

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Are you one of those people who would rather be in the know than in the dark? If you are one of those people, then this article will serve you well. This article will discuss the advantage of being “in the know” when it comes to your mortgage or any other substantial loan. Before deciding which loan is right for you, it is a good idea to be well acquainted with an essential tool for lending. This tool, called an amortization schedule, will make borrowing easier.

An amortization schedule is a “complete schedule of periodic blended loan payments, showing the amount of principal and the amount of interest that comprise each payment so that the loan will be paid off at the end of its term”¹. The principal of a loan is the amount borrowed, while interest is an amount calculated on the principal. To figure out the amortization payments for a loan you are paying, there are a number of free amortization calculators available for use online. Some links for these calculators can be found within the resources section.

An amortization schedule keeps you in the know, because it is a quick and easy way to show, in detail, how a few measly bucks can impact “your mortgage commitment; the total interest paid over the life of the loan, and your mortgage payoff date”². To show how an amortization schedules wok refer to the following example. Plug in two mortgages that you want to compare into an amortization calculator. The calculator will provide you with the amortization schedules for both mortgage options. If you compared two $100,000 mortgages at the same interest rates, one mortgage lasting 15 years, while the other lasts 30 years, you would soon find out that the 15 -year mortgage carries a much higher payment². If the interest rates for both mortgages had interest rates of 7 percent, then the 15-year mortgage and principal payments would be a whopping $898.00, while the 30 -year mortgage and principle payments only amount to $665.00².

For more information regarding how to use an amortization schedule to your advantage, refer to the links within the sources section below. There are also links to amortization calculators within the resources section below.

Resources:
¹ http://www.homeloanslocal.com/mortgage_payment_calculator.asp
² http://www.myamortizationchart.com/

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