It is very common to get a home equity loan these days and people do it all the time, but few know the amortization schedule. Many people have no idea what this schedule is, what it means and how it is beneficial, since it is a very useful tool specially designed to help those who took out a mortgage from a bank. Today we will talk about the basics of these charts and try to find out what benefits you can get from them.
There are actually three parts to a mortgage, or any loan that you take. The first part is the principal. This is the amount you really owe the bank. You took out a mortgage for, say, $ 250,000 on your home. This is the main fund and this is the actual amount of money that the bank paid you.
The second is the down payment: when you take out a mortgage, the bank will ask you to deposit money as collateral. The amount of the initial payment depends on your bank at the end of the day, but in this case we will assume that the payment to be made to the bank is, say, $ 30,000.
The third part of the loan is the interest rate, which again will depend on the bank and the type of mortgage you take out. There is a very important thing to know about the interest rate: if the interest rate is, say, 5%, then this is the annual rate, and since most people make monthly payments, you will have to divide by 12 to get the monthly interest rate.
As you can see, this is a rather technical procedure and not everyone can master the math and perform these calculations, which can be quite complicated, on their own. This is where a useful printable amortization schedule with extra payments comes in handy – it’s a very simple method to track your payment.
It will also help you figure out how much interest is paid each month, and since you have all the numbers, you can see the rate at which it decreases over time.
It also shows you how much money you paid for the loan, which means you know exactly your financial situation at any time. This can be especially helpful because you know how much principal is left, which means you can try to take the load off yourself as soon as possible.
The best part about an amortization schedule is that it gives you the freedom to know exactly what your schedule and loan status is when you want and know everything without confusion.