A mortgage amortization schedule is a crucial tool for understanding how your mortgage loan will be paid off over time. It breaks down each monthly payment into the portion that goes towards interest and the portion that goes towards the principal loan balance. This detailed breakdown helps you visualize your loan's progress and the total cost of borrowing.
How is the Amortization Schedule Calculated?
The calculation of an amortization schedule relies on a standard mortgage payment formula and then iterates through each payment period. Here's a breakdown:
Monthly Interest Rate: The annual interest rate is divided by 12 (e.g., 5.5% / 12 = 0.004583).
Total Number of Payments: The loan term in years is multiplied by 12 (e.g., 30 years * 12 months/year = 360 payments).
Monthly Payment Calculation: The standard formula for calculating the fixed monthly payment (M) is:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
Ending Balance = Starting Balance – Principal Paid
The ending balance of one month becomes the starting balance of the next. This process repeats until the ending balance reaches zero.
Key Components of the Schedule:
Month/Year: The specific month and year the payment is due.
Starting Balance: The amount owed at the beginning of the payment period.
Payment: The fixed total amount paid each month (calculated above).
Interest Paid: The portion of the payment that covers the interest accrued for that month.
Principal Paid: The portion of the payment that reduces the actual loan balance.
Ending Balance: The remaining loan amount after the payment has been applied.
Why is an Amortization Schedule Important?
Transparency: It shows exactly where your money is going with each payment.
Equity Building: You can see how your home equity grows over time, especially as more of your payment goes towards principal in later years.
Total Cost: It helps you understand the total interest you will pay over the life of the loan.
Extra Payments: It allows you to strategize if you want to make extra payments towards principal to pay off the loan faster and save on interest.
Financial Planning: Essential for budgeting and long-term financial planning.
By using this calculator and understanding your amortization schedule, you can make more informed decisions about your mortgage and your financial future.
function calculateAmortization() {
var loanAmount = parseFloat(document.getElementById("loanAmount").value);
var annualInterestRate = parseFloat(document.getElementById("annualInterestRate").value);
var loanTermYears = parseInt(document.getElementById("loanTermYears").value);
var startDateInput = document.getElementById("paymentStartDate").value;
var errorMessages = [];
if (isNaN(loanAmount) || loanAmount <= 0) {
errorMessages.push("Please enter a valid positive Loan Amount.");
}
if (isNaN(annualInterestRate) || annualInterestRate < 0) {
errorMessages.push("Please enter a valid non-negative Annual Interest Rate.");
}
if (isNaN(loanTermYears) || loanTermYears <= 0) {
errorMessages.push("Please enter a valid positive Loan Term in Years.");
}
if (startDateInput.trim() === "") {
errorMessages.push("Please enter a Payment Start Date (MM/YYYY).");
} else {
var dateParts = startDateInput.split('/');
if (dateParts.length !== 2) {
errorMessages.push("Invalid Date Format. Please use MM/YYYY.");
} else {
var month = parseInt(dateParts[0]);
var year = parseInt(dateParts[1]);
if (isNaN(month) || month 12 || isNaN(year) || year 2100) {
errorMessages.push("Invalid Month or Year in the Payment Start Date.");
}
}
}
if (errorMessages.length > 0) {
alert("Please correct the following errors:\n- " + errorMessages.join("\n- "));
return;
}
var monthlyInterestRate = annualInterestRate / 100 / 12;
var numberOfPayments = loanTermYears * 12;
var monthlyPayment;
if (monthlyInterestRate === 0) {
monthlyPayment = loanAmount / numberOfPayments;
} else {
monthlyPayment = loanAmount * (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments)) / (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1);
}
var totalPayments = monthlyPayment * numberOfPayments;
var totalInterestPaid = totalPayments – loanAmount;
document.getElementById("monthlyPaymentDisplay").textContent = "$" + monthlyPayment.toFixed(2);
document.getElementById("totalPaymentsDisplay").textContent = "$" + totalPayments.toFixed(2);
document.getElementById("totalInterestDisplay").textContent = "$" + totalInterestPaid.toFixed(2);
var tableBody = document.getElementById("amortizationTable").getElementsByTagName('tbody')[0];
tableBody.innerHTML = ""; // Clear previous table rows
var currentBalance = loanAmount;
var currentMonth = parseInt(startDateInput.split('/')[0]);
var currentYear = parseInt(startDateInput.split('/')[1]);
for (var i = 0; i < numberOfPayments; i++) {
var interestForMonth = currentBalance * monthlyInterestRate;
var principalForMonth = monthlyPayment – interestForMonth;
// Adjust for the last payment to ensure ending balance is exactly zero
if (i === numberOfPayments – 1) {
principalForMonth = currentBalance;
monthlyPayment = currentBalance + interestForMonth; // Recalculate last payment to match remaining balance + interest
}
var endingBalance = currentBalance – principalForMonth;
// Prevent tiny negative balances due to floating point inaccuracies
if (endingBalance < 0.01 && i === numberOfPayments – 1) {
endingBalance = 0;
principalForMonth = currentBalance; // Ensure principal covers the remaining balance exactly
monthlyPayment = currentBalance + interestForMonth; // Recalculate last payment one last time if needed
}
var monthYearString = (currentMonth 12) {
currentMonth = 1;
currentYear++;
}
}
}