|Pm|Date | Pmt Amt| Prin | Int
|Tot. Prin| Tot. Int| Balance |
When a mortgage originates, the amount to be borrowed, the interest
rate and term are defined in an agreement between the mortgage company
and the borrower. With this information the mortgage company calculates
the amount of the payment. After the payment is calculated, they
can then calculate an amortization schedule. The amortization schedule
is simply a schedule of principal and interest payment amounts.
The following is a sample portion of an amortization schedule generated
by Mortgage Minder. This schedule was based on a 100,000 dollar
loan at 9.5 percent for 30 years.
| 1|Oct96| 840.85 | 49.19|
791.67| 49.19 | 791.67 | 99,950.81|
| 2|Nov96| 840.85 | 49.58| 791.28| 98.76 | 1,582.94| 99,901.24|
| 3|Dec96| 840.85 | 49.97| 790.88| 148.73 | 2,373.83| 99,851.27|
| 4|Jan97| 840.85 | 50.37| 790.49| 199.10 | 3,164.32| 99,800.90|
| 5|Feb97| 840.85 | 50.76| 790.09| 249.86 | 3,954.41| 99,750.14|
| 6|Mar97| 840.85 | 51.17| 789.69| 301.03 | 4,744.10| 99,698.97|
| 7|Apr97| 840.85 | 51.57| 789.28| 352.60 | 5,533.38| 99,647.40|
| 8|May97| 840.85 | 51.98| 788.88| 404.58 | 6,322.26| 99,595.42|
| 9|Jun97| 840.85 | 52.39| 788.46| 456.97 | 7,110.72| 99,543.03|
|10|Jul97| 840.85 | 52.81| 788.05| 509.77 | 7,898.77| 99,490.23|
|11|Aug97| 840.85 | 53.22| 787.63| 563.00 | 8,686.40| 99,437.00|
|12|Sep97| 840.85 | 53.64| 787.21| 616.64 | 9,473.61| 99,383.36|
Take a look at the first payment,
particularly the "Payment", "Principal" and "Interest" columns.
Out of that 840 dollar payment only 49.19 was applied towards
the principal amount of the loan. This means that after the
840.85 payment, the amount owed is still 100,000 minus 49.19 or
99,950.81 as shown in the "Balance" column. Now notice the rest
of the payments and the way they are broken down. The payment stays
the same, but the principal and interest amounts change. Each payment,
the principal amount increases and the interest amount decreases.
That is because the interest is calculated on the remaining unpaid
balance of the loan, which is constantly being reduced (ever so
slightly in the beginning) by the principal amount of the payment.
At some point the principal amount of the payment will be more than
the interest amount. One would think that this point would be the
middle of the term, or in this case around the 180th payment.
This is not true. In fact, with this loan the principal amount of
the payment exceeds the interest amount around the 273rd payment.
See for yourself.
|Pmt|Date |Pmt Amt| Prin | Int
|Tot. Prin | Tot. Int | Balance |
|271|Apr19| 840.85| 413.53| 427.33| 46,435.41|181,436.08| 53,564.59|
|272|May19| 840.85| 416.80| 424.05| 46,852.21|181,860.14| 53,147.79|
|273|Jun19| 840.85| 420.10|
420.75| 47,272.31|182,280.89| 52,727.69|
|274|Jul19| 840.85| 423.43| 417.43| 47,695.73|182,698.32|
|275|Aug19| 840.85| 426.78| 414.08| 48,122.51|183,112.39| 51,877.49|
|276|Sep19| 840.85| 430.16| 410.70| 48,552.67|183,523.09| 51,447.33|
|277|Oct19| 840.85| 433.56| 407.29| 48,986.23|183,930.38| 51,013.77|
|278|Nov19| 840.85| 437.00| 403.86| 49,423.23|184,334.24| 50,576.77|
|279|Dec19| 840.85| 440.45| 400.40| 49,863.68|184,734.64| 50,136.32|
|280|Jan20| 840.85| 443.94| 396.91| 50,307.63|185,131.55| 49,692.37|
|281|Feb20| 840.85| 447.46| 393.40| 50,755.08|185,524.95| 49,244.92|
This is also almost the point where
half of the loan is paid. That means it would take you over 23
years to pay off the first half this loan, which means the other
half is paid in a little over 7 years! Now look at the end
of this loan.
|Pmt|Date |Pmt Amt| Prin | Int
|Tot. Prin | Tot. Int | Balance |
|349|Oct25| 840.85| 764.94| 75.92| 91,175.29|202,282.83| 8,824.71|
|350|Nov25| 840.85| 770.99| 69.86| 91,946.28|202,352.69| 8,053.72|
|351|Dec25| 840.85| 777.10| 63.76| 92,723.37|202,416.45| 7,276.63|
|352|Jan26| 840.85| 783.25| 57.61| 93,506.62|202,474.06| 6,493.38|
|353|Feb26| 840.85| 789.45| 51.41| 94,296.07|202,525.47| 5,703.93|
|354|Mar26| 840.85| 795.70| 45.16| 95,091.77|202,570.62| 4,908.23|
|355|Apr26| 840.85| 802.00| 38.86| 95,893.76|202,609.48| 4,106.24|
|356|May26| 840.85| 808.35| 32.51| 96,702.11|202,641.99| 3,297.89|
|357|Jun26| 840.85| 814.75| 26.11| 97,516.86|202,668.09| 2,483.14|
|358|Jul26| 840.85| 821.20| 19.66| 98,338.05|202,687.75| 1,661.95|
|359|Aug26| 840.85| 827.70| 13.16| 99,165.75|202,700.91|
|360|Sep26| 840.85| 834.25| 6.60|100,000.00|202,707.51|
The payments are still the same, but
the principal and interest amounts have switched places. Now the
majority of the payment is showing in the principal column and the
smaller amount in the interest column. Again, this is because the
interest is calculated on the unpaid amount of the loan. Toward
the end of the loan, the unpaid amount is smaller therefore the
amount of interest paid for those payments is smaller as well.
The idea of mortgage acceleration is to pay an additional amount
towards the principal portion of the loan to reduce the principal
and reduce the amount of interest charged for the next payment cycle.
I think you will be surprised when you see the difference that just
a few dollars each month can make.
Using the same loan as an example,
would you believe that you can save over FIFTEEN THOUSAND dollars
over the term of the loan by sending only 10 dollars a month extra
with your payment! You will also cut 1.75 years or 22 payments
off the term of the loan. If you pay an extra 25 dollars each month,
you save almost 33,000 dollars in interest and cut the term to 26
years! How about 100 dollars
extra each month? You'll save over 80,000 dollars in interest and
pay the loan off 10 years early!
Now for the trick question of the day.
The normal payment for this loan is 840 dollars. How much do you
think you would have to send each month in order to pay the loan
off in half the normal term? Double the payment to 1680 dollars?
Maybe a little less? Would
you believe that if you paid an extra 205 dollars each month, you
will pay this loan off in 15 years!! And in the process, save over
115,000 dollars in interest! YES, that IS 115 THOUSAND dollars!
Are you ready to you get started?
Get Started Now! (this is very
Now all you have to do is decide how much you can send each month.
Decide now and get started right away.
The longer you wait, the more money you could have saved.
For example, if your loan was like the example we have used throughout
this document, you will save almost 83,000 dollars by paying just
100 dollars extra each month, IF you start with the first payment.
Now what if you waited a year or two and then started the extra
payments? Well, if you started the extra payments on the second
year, you will still save over 76,000 dollars. So that means the
extra 1200 dollars in payments that you would have made the first
year would have been worth 7,000 in interest savings. If you wait
until the second year, your savings drop to just under 71,000 dollars,
which is still good, but not as good as if you start with the first
payment. The point here is to get started as soon as possible. The
sooner you start, the more you will save.
NEW Mortgage Minder 3.0
Mortgage Minder is a software package for Windows designed to help
you calculate the right amount to send as an extra principal payment.
With Mortgage Minder, you can try several scenarios and see instant
feedback to help you decide what plan is right for you. In addition,
once you start sending extra payments, you can use Mortgage Minder
to track your progress by updating your saved data file monthly.
You can even print reports if you prefer reading the data in printed
format. Mortgage Minder 3.0 new for 2002 now supports Canadian mortgage
calculations and variable interest rates. For more information about
Mortgage Minder, feel free to send
me an e-mail , download the
fully functional demo, or check out the on-line