James V. Hecker

Santa Clarita California

  • Home
  • About
    • About Me
    • Privacy Policy
    • Site Security
    • Accessibility Statement
  • Mortgage Info
    • Mortgage Calculator
    • What to Expect at a Loan Closing: A Step-by-Step Guide
    • Home Appraisal
    • Home Inspection
    • Loan Checklist
    • Loan Process
    • Loan Programs
    • Mortgage FAQ
    • Mortgage Glossary
  • Guides
    • Downpayment Assistance Guide
    • New Home Purchase Guide
    • Refinance Strategies
  • Blog
  • Contact

An Overview of Amortization: It Plays A Role In Monthly Mortgage Payments

March 3, 2021 by James Hecker

An Overview of Amortization: It Plays A Role In Monthly Mortgage PaymentsEven though this may sound like a fancy word, amortization is simply a long word for a straightforward topic. Furthermore, it plays a significant role in the determination of monthly mortgage payments.

Before taking out a home loan, homeowners need to understand how their payment schedule works and what this means for the future of the home loan.

Amortization refers to the way monthly payments are calculated to make sure that homeowners pay the same amount every month throughout the life of the loan. Even if homeowners do not stay in the house for the life of the loan, amortization will still play a significant role in the amount of money they receive if they decide to sell the home.

Amortization Plays A Major Role In Calculating Monthly Payments

First, amortization plays a major role in calculating monthly payments because it ensures that homeowners pay the same amount of money over the life of the loan. Even though there is interest on the home loan, and inflation will play a role in the value of money during the life of the loan, the monthly payment is going to stay the same. This is particularly beneficial to homeowners who are still working and believe that their income is going to go up during the life of a 15 year or 30 year mortgage. Even if their income goes up, and even if inflation plays a role, their monthly mortgage payments will still stay the same thanks to amortization.

Amortization Divides Interest And Principal In Monthly Payments

On the other hand, amortization also plays a role in calculating interest versus principal in monthly mortgage payments. At the beginning of the loan, the majority of each monthly payment goes toward interest on the loan. At the end of the loan, the majority of each monthly payment goes toward principal. This also means that if homeowners decide to sell their home at some point during the loan, they might not get as much money as they think because most of their monthly payments have gone toward interest and haven’t built up any equity. This is another key factor homeowners should keep in mind when it comes to amortization.

Filed Under: Mortgage Tagged With: Amortization, Mortgage, Mortgage Payment

James Hecker

Contact James


Focus Lending Group, Inc.
DRE #00902195 • NMLS #214601

DIRECT: 661.295.7030
MOBILE: 661.714.2145
FAX: 661.244.4932
james@james4loans.com

James Hecker Logo

Connect with Me!

Search articles

Latest Articles

  • How Can Home Renovations Protect You from Natural Hazards
  • What’s Ahead For Mortgage Rates This Week – November 27, 2023
  • Uncovering the Hidden Issues Beyond Real Estate Inspections
  • Exploring the Diversity of Property Types: Finding Your Ideal Home
  • How Will A Short Sale Affect Your Ability To Buy Another House In The Future?

Focus Lending Group, Inc. is a licensed Broker/Lender with Cal DRE Lic.# 02034155, NMLS #1592078

Previous Posts

Categories

Our Location


27201 Tourney Rd. Ste 201
Valencia, CA 91355

Copyright © 2023 · Powered by MySMARTblog

Copyright © 2023 · Genesis Sample Theme on Genesis Framework · WordPress · Log in