How Amortization Impacts Your Fixed-Rate Loan

Amortization is an important term in real estate lending, but one that is not well understood outside of people working in the industry.

This concept has an impact on payments for fixed-rate loans, but not specifically on how much you pay. Instead, this term has to do with what your payment goes to.

Sound confusing? Let us explain…

Understanding Amortization

Understanding Amortization

Amortization is simply the process of paying off a loan over time with equal payments at a given period, which is usually monthly. As each month comes and goes, the payments are exactly the same, down to the very penny. However, what makes up the payment will change.

Each monthly payment, starting from the beginning, is made up of two parts: balance and interest. In other words, there is a portion that goes to reducing your loan balance, and a portion that goes to your interest costs.

CLICK ON THE IMAGE TO VISIT OUR MORTGAGE CALCULATOR WITH AMORTIZATION.

At the beginning of the loan, the interest costs are highest. This is especially true for long-term loans, such as 30-year mortgage loans. With this loans, a large portion of the loan goes to interest expenses, and you only pay a small fraction towards the balance of the loan. You don’t make much progress on the debt total because most of the money is going to interest, but you are making progress.

As time goes by and you continue to make payments, more of each monthly bill will go towards the loan total and less will be needed to pay off interest.

These types of loans are designed to completely pay off the loan total by a certain date, and your last payment will completely pay off the remaining amount.

The benefit of amortization is that your payments never change, so you are always paying the exact same amount, regardless of how much is on the balance and how much goes to interest.

The longer your amortization period, the lower your monthly payments will be, while shorter periods bring higher payments because the loan is being crammed into a smaller timeframe.

It’s important to remember that a shorter amortization schedule will save you money in the long run because you are paying less interest over the total life of the loan. If you have a shorter amortization period, such as 15 years instead of 30, you will save a considerable amount because the loan has less interest added to the loan. (Interest rates on shorter loans will often be lower.) However, the monthly payments, regardless of interest, will be higher with a 15-year mortgage.

When working with a lender, you may want to request an amortization schedule in addition to the “payment schedule.” A payment schedule is a simple breakdown of when your payments are due; they don’t provide the deeper information on balance and interest that you get from an amortization schedule.

If you are knowledgable about amortization schedules, you may want to make added payments on your loan to reduce the total amount of interest that you pay. There is nothing wrong with this strategy, but you should be sure that your loan does not have any prepayment penalties, which can disrupt your plan.

Using Our Amortization Schedule

Our amortization schedule calculator is a simple and convenient way for you to gain information on your mortgage. Here is a basic guide to how it works…

House Price  

This is not exactly the full property value, but the amount of money you will be borrowing from the bank. For example, if you are purchasing a $500,000 home, but have a $50,000 down payment, you can simply enter $450,000 into the Home Price amount. This amount is also the total balance that will be progressively reduced as you make payments. Whatever amount you are borrowing from the bank, enter that amount into this field.

Mortgage Term in Years

Next, you can enter the mortgage term in years. Mortgages can be created to virtually any number of years, (within reason, of course) but the most common terms are either 15 or 30 years. As we discussed above, a 30 year mortgage will have smaller payments but will cost more in the long run, while 15-year mortgages have larger payments but cost less overall. It’s also possible to get extremely short 10-year mortgage loans or lengthy 40-year mortgages.

Mortgage Term in Months

With our mortgage calculator, you also have the option of entering the amount of months. This field is directly connected to the years, so if you enter 30 years into the field above, 360 will automatically enter the “Mortgage Term in Months” field. (30 years = 360 months.) If you enter 240 into the months areas, 20 years will be automatically entered into the years. This field is helpful because it also tells you how many total payment you will need to make. (Assuming monthly payments.)

Interest Rate

The final variable that you can enter is your interest rate. Understanding the specific amount of interest you will pay can be difficult, however, so speak with a mortgage professional to get an idea of what your interest rates will be. While there are common indexes for interest rates, this number will be affected by your credit situation, the type of loan you choose, and other factors.

Add Extra Payments

The final factor to enter, which is actually an optional feature, is to enter any extra payments. This feature helps you estimate the effects of any added payment that you make towards the loan. For example, if you expect to add an extra $1,000 every January, you can enter this amount into your loan calculation.

Get Expert Guidance on Your Mortgage Loan

You can work with an expert team to get the right loan for your specific situation. Contact us today and we’ll help you understand how amortization affects your loan payments.

With a common-sense approach to mortgage approval, we are your ally for affordable terms!

Testimonials

Great Job Chad Baker Team & Homepoint!
I was very impressed with the professionalism and quick response times from Chad Baker & his team during the entire process. I would highly recommend Home Point for mortgage needs. Great Job! ”

“Chad and his team are exactly who you want handling the financing of your home. Whether it be a new purchase or refinance, he and his team are one of the most professional, responsive group of people I’ve worked with. Buying a home can be very stressful and Chad and his team took all of the necessary steps to make the process as painless and as quick as possible. They are extremely knowledgeable, organized and have great follow through. You won’t ever be left wondering what the next steps are. I highly recommend him and will use him in all of our real estate transactions moving forward.”

“Chad and his team got me funded in less than 30 days, completing a deal that another broker fumbled around with for almost 90 days. Effective, efficient and excellent communication skills. Outstanding professionalism.”

Chad was very personable. His staff was very suportive.
I had the pleasure of working with Chads team. Everything went as planned. I was very pleased. I still want to take them to dinner. I am completely enjoying my new home”

Outstanding experience

I was referred to Chad by my Realtor for a purchase of a new house. The experience with Chad and the team (I mainly worked with Juliann) was nothing short of outstanding. From start to finish there were always quick to respond and when needed, notify me of any new documentation that was required. There were very helpful explaining to me the pros and cons of different financing options as well as some other loan related issues, such as termite clearance outside the purchase contact and septic tank certification process. Overall, very knowledgeable and processional team. Loan preapproval was done in a single day and loan documents were ready for signing in 21 days, which was 9 days ahead of schedule. That never happened to me before.

“I wanted to reach out and tell you both Thank You for working so hard on my loan. I really appreciate how much effort you both put in to make it happen! Top notch, one of the best I have ever seen in the business.”

Awesome Team

Chad and his team was awesome throughout the entire process. They made things easy and smooth, and able to answer any questions at anytime. By far the best experience with a lending team yet. Great job!”

Chad and his team were Awesome to work with! I was referred to Chad by a good friend of mine. I was very impressed with the professionalism and quick response times from Chad Baker & his team during the entire process. I screened over 3 lenders before selecting the Chad Baker Team and I’m confident I made the right choice. It’s obvious that customer service is their #1 priority and it shows. I highly recommend Chad if you have lending needs. ”

“I must say I was extremely impressed with the professionalism and quick response from Chad Baker & his entire team. I screened over 5 lenders before selecting the Baker Team & boy am I happy customer. It’s evident that customer service is a priority for these folks.”

“Chad, it was a pleasure working with you. Your loan was smooth, speedy, and we were kept well informed. I will make sure to prioritize offers where you are the loan officer as I know they run smoothly.”

EXCEPTIONAL, SUPER EXCEPTIONAL! The most professional, accountable and committed mortgage service we have ever worked with. With numerous experiences in buying and refinancing homes, by far Chad Baker and his team remain at the top of our list. We feel very blessed to have located such a committed company who serve their clients with an exceptional first “first class” mindset.

“Chad and his entire team were over the top amazing, professional, and attentive throughout the entire home loan/buying process. I could not have asked for a better team to have on my side through what could be one of the most challenging and stressful processes one experiences. From the first conversation I had with Chad, I felt comfortable with him. He helped guide us through the process without ever once making us feel uneasy, unimportant, or uninformed. I never felt silly or stupid for asking the same questions over and over until I fully understood what we were getting into, or until something made total sense to me. The home loan world is fast paced, overwhelming, and confusing, and Chad and his team held our hands and helped us to feel comfortable and confident about our choices. He and his team were always there for us day or evenings, weekdays, or weekend and never made you feel like you were a bother if you had a burning question you had to get answered at 8pm Saturday night. I will use them again and again, and suggest them to any friend, family, or acquaintance. Seriously, they are rock stars. They work hard for you to get you into your dream home, we could not be happier with their hard work, dedication, and kindness.”

“This is the second time that I have worked with Chad (home purchase & refinance). He has become my subject matter expert and someone I depend on for all finance needs related to our home and real estate investments. My favorite things about Chad are his depth of knowledge, responsiveness, honesty and the great service he provides. I have referred countless friends and family of mine to work with him for no other reason than I know that he will treat them well and equip them for the best possible outcome. Chad will add tremendous value to any real estate transaction that you have and I am grateful to have him as a resource.”

“Thank you for all the hard work (even on weekends!) you and your team have devoted to seeing this through in a very efficient manner. It’s been an easy process for me and, you and your team have been a delight to work with.”

I HIGHLY recommend Chad and his team.

Chad and The Chad Baker team really helped me from start to finish with my loan process. They were extremely responsive and provided me updates on a daily basis. I had a few personal issues that they helped me work through so I could get the best loan program and best rate. Very knowledgeable about the industry, rates and trends.I HIGHLY recommend Chad and his team. I’m happy to offer a reference upon request. Please ask Chad for my contact information.”

An ‘A’ Team!
We just closed on our second transaction with the Chad Baker team. They are very well organized and I can attest that they are looking out for their clients’ best needs. A special shout-out for Juliann B. who was our guide through the painful loan process. We found Juliann to be very responsive, kind, patient, and diligent in getting both our refis closed well.”

“Chad Baker is THE BEST, most professional, understanding, HONEST person I’ve ever worked in the mortgage industry. He knows exactly what he’s talking about, will never promise something he can’t deliver, and will bend over backwards to get you what you need. I had a very unique problem qualifying and every other mortgage company I worked with assured me from the beginning that they could get me financed, and then it would all fall apart once we hit underwriting. Chad understood my circumstance from the beginning and patiently explained every step of the way. I can’t thank you enough Chad! Juliann has been great keeping me updated and making sure that everything comes together in a timely fashion. She also appreciates my sense of humor, which gives personality to a boring funding process. Thanks Juliann! I HIGHLY recommend Home Point and if I ever buy another home, will absolutely use them again.”

Outstanding experience

I was referred to Chad by my Realtor for a purchase of a new house. The experience with Chad and the team (I mainly worked with Juliann) was nothing short of outstanding. From start to finish there were always quick to respond and when needed, notify me of any new documentation that was required. There were very helpful explaining to me the pros and cons of different financing options as well as some other loan related issues, such as termite clearance outside the purchase contact and septic tank certification process. Overall, very knowledgeable and processional team. Loan preapproval was done in a single day and loan documents were ready for signing in 21 days, which was 9 days ahead of schedule. That never happened to me before.

Chad Baker and his team are amazing!

My husband and I found Chad through an article he had written. Every aspect of working with Chad and his team was exceptional. From our initial phone call where he explained the many options we had, to advice he gave in dealing with somewhat challenging sellers, and closing our loan ahead of schedule, the loan process with Chad and his team went very smoothly. I especially appreciated the one-on one guidance from Juliann, who really made me feel like I was her only client. I look forward to working with Chad and his team again and would highly recommend them to anyone looking for a mortgage.

highly recommend Chad and his team. They were always available for any questions, concerns etc. we had. The process to close the loan went super fast. Chad and his team always went above and beyond. The customer service was the best! I will definitely recommend to all Thank you again for everything!

Amazing Service!

Chad and his team were very attentive to all of my needs, they called , emailed and checked in often. No question was left unanswered! Maria was a superstar! taking all my calls no matter the time or day and walking me through every process. The follow through was amazing and I am just so happy that my realtor referred them to me. I was originally referred to another lender that pretty much had no time for me nor did they even bother to try and find me the right loan since I am a widow with one income and a first time buyer with so so credit. I am completely happy with my loan and everything they did for me! Thank you Chad, Maria and Karina for all you did!

I was amazed how quickly Chad was able to knocked out our refinance!. I highly recommend Chad he & his team did an incredible job! I had 3 others I was working with, including a Credit Union. Chad was able to offer me a lower rate with no fees! Based on the other 3 top financial bids I had for this refinance. ”

“Hey Chad, Just wanted to send a quick note to Thank You for all your work and effort to get this escrow closed. It was a pleasure to work with someone as professional as yourself. If I have a client that ever needs a lender you will definitely be someone that I  would recommend.”

“Chad – Your team has been nothing short of amazing. Juliann has aggressively followed-up with escrow and gone out of her way to make sure things get done on schedule. Matt and I can’t express to you enough how much we’ve appreciated all of your counsel at the beginning of the process and her execution to see it through to close. As always, appreciate everything that you guys have done to see this through.”

Incredible Turnaround and Stellar Customer Service. Chad and his team helped us get into our first home here in San Diego. When we first started the process we were skeptical it would even be worth applying. But Chad and his team walked us through the whole lending process with integrity and know how that surpassed our expectations. After helping us to pull together our pre-qualification, he and his team stayed at the ready. Before we even walked up to a home we were seriously interested in he had the data we needed over to us and our realtor. After finding the home we wanted to place a bid on, we were able to place a bid with a matter of a few hours. Then, after having our offer accepted, he had our loan package completed and the keys in our hands in under a month — I am pretty sure it was less than. Like I said, incredibly fast and professional turnaround. if you are looking for a motivated lender who can walk you though every detail and have your back every step of the way, Chad and his team at HomePoint Financial is your best decision. Recommend them highly!”

“We’re loving our new place and we’re very pleased with how smoothly everything went through closing. Thanks for keeping us up to date on the possibility of refinancing at a lower rate; we trust your judgement as far as waiting until the rate is around 5% lower before we refinance. We’re very interested in pursuing that if rates drop to that level. Thanks so much for all your help and personal attention!”

Thank you, Chad. You have been amazingly responsive to all my questions, and you have a great staff assisting you. Thanks so much for all your help!

“Chad and his team were fantastic. They were incredibly responsive to us and our needs. Chad laid out several refinance options for us, and was very supportive when we decided on the option we felt was best for our family. Chad and his team worked our deal and got our mortgage funded incredibly fast, with excellent service and even took the time to thank us personally once we funded. I can’t recommend Chad enough!”

“We signed all our papers yesterday afternoon. I wanted to thank each one of you for all your hard work and tenacity in making this happen for Michelle and I. This is by far the easiest closing we have been through. All thanks to you all. You all the best at what you do. No other group works like this together. Again, thank you all, from Michelle and I, we will be forever grateful. Absolutely the best team I have ever dealt with. From beginning to end, the customer service provided was beyond reproach. Everyone gave us their personal attention and that made it so easy.”

Everything about our transaction with this lender was perfectly explained to us, easy to do, and they were able to help us get our loan closed ahead of schedule. It was a perfect 10 and we couldn’t have been happier with the whole thing

Excellent service!
My wife and I purchased a home in Escondido, first home together. Chad and his team made the whole process extremely easy and helped us close quickly. Will recommend to all friends and family!”

Excellent service!. Recently purchased a property in Northern San Diego County. Chad and his team were recommended to me to check out. The rate he acquired was a full point & a half better than the Broker I have been using for years. His team was exceptional and did great follow through. Definitely 5 star service!”

“Hey Chad – thank you so much to you in particular as well as your team. It’s been a real pleasure working with someone who’s as responsive and helpful throughout the process, as you’ve been. We really appreciate what you’ve done. ”

“Good experience

I recommend chad because he is not pushy or trying to manipulate as others in the same business, the process was smooth with no obstacles, best team. ”

“Chad and The Chad Baker team really helped me from start to finish with my loan process. They were extremely responsive and provided me updates on a daily basis. I had a few personal issues that they helped me work through so I could get the best loan program and best rate. Very knowledgeable about the industry, rates and trends. I HIGHLY recommend Chad and his team. I’m happy to offer a reference upon request. Please ask Chad for my contact information.”

I was amazed how quickly Chad was able to knocked out our refinance!
I highly recommend Chad he & his team did an incredible job! I had 3 others I was working with, including a Credit Union. Chad was able to offer me a lower rate with no fees! Based on the other 3 top financial bids I had for this refinance. ”

“Chad, Juliann and the team were great in helping me get through this process. It is not an easy process but they stayed with me the entire time and I am truly grateful. ”

“Hi Juliann and Chad, I wanted to take a moment and thank you guys for what would have been impossible for us to do without you. We wouldn’t have our keys in hand if it had not been for your help in navigating the financing, and Juliann’s perseverance in getting the rest of the players in the transaction to deliver. Out of everything, our interaction with your office has been a highlight – and your customer service has been beyond everything we’ve experienced in the real estate industry. Is there a way we can provide any reviews, ratings, testimonials, or other statements that can express to your potential future customers how much you guys do to make the customer’s life easy? Please let us know how we can share our great experience with you to the rest of the public. Whether we refinance this under a VA, or get in a bigger/better house in a few years, we’re not going to go anywhere else for financing. We are customers of yours as long as you are in business. Thanks again for getting us in a house!”

I highly recommend Chad Baker. He does a phenomenal job and won’t trauma you or your clients. He has a whole team that works on the loans. And all the team members are great. He has a person that can translate for your clients that are Chinese. He is as good of a loan officer as you are an agent, and that is what you want when referring clients to a lender.

“Juliann – Thank you very much for your patience and help with everything. I can say 150% that we could not have gotten through this without you. I have been through this process before a few times BUT never have received this type of care/attention. This process is intense and you managed to humanize this life changing experience for us – rather than being a loan number. If you or Home Point ever need an official recommendation from us, you can count us in.”