Mortgage Payment Tables Offer Insight Of Money's Destination
When buying a home, it is understood that, depending on the size of the loan, the interest rate and the length of the loan, buyers usually pay more in interest then they do in principal on the loan. This may be one reason that most home buyers choose not to look at mortgage payment tables as they would rather not be depressed knowing that it can take over half of the life of the loan before any real headway is made against the principal amount of the loan.
Prior to the internet and computer calculations of the complicated art of figuring the cost of home loans, many relied on pencil and paper to calculate their total cost of homo ownership. They would simple multiply the total number of payments by the monthly payment amount to see how much they were going to end up paying for the house. For example, mortgage payment tables will show that a home loan for $1000,000 for 30 years at seven percent interest, will end up costing a total of $139,000 in interest payments alone.
Most mortgage payment tables break down the loan information by year, showing the annual loan balance, how much interest is paid for each year, how much of the payments for the year were applied to the loan balance and the total amount of the payments that was applied towards the interest.
Home Equity Hinges On Home's Value
While the mortgage payment tables may show how the loan is being amortized during the life of the mortgage, the amount of equity in the home will also vary based on the valuation of the property. Simply paying down the principal amount does not automatically increase the amount of equity available. If the property values increase, the equity amount will go up. Conversely, if property values decline, the home equity goes down.
According to mortgage payment tables on the same $100,000 30-year loan at seven percent, for the first 20 years, the annual amount being paid in interest will be higher than the amount applied to the principal. The amount applied to the interest will not balance out to the amount applied to the loan balance for about 16 years.
Lenders always had these mortgage payment tables on hand whenever they were discussing home loans with customers with different rates and amounts. However, the paper versions of these charts disappeared with the use of computer software that allows them to work different scenarios into the equation based on the customer's individual variables.
