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Loan Amortization
Loan amortization refers to the way that periodic payments are
structured to pay off a loan.
Amortized payments are determined by dividing the amount owed (the
principal) by the number of payment periods (usually months)
remaining. Then, interest is added. Each payment reduces both the
principal and the interest.
In most amortized home loans, the early loan payments are used mainly
to pay off the interest. It may take more than half the
life of the loan before the interest and principal portions of the loan
payment are equal. The final loan payments are used mainly to
pay off the principal.
A loan amortization schedule shows how each loan
payment is used to pay off interest and principal. It may also
show the amount of principal and interest that remain to be paid
at any point in time.
The various mortgage calculators on this website give users an option - users
can create an amortization schedule for their loan, or they can leave it out.
Also, in addition to the standard amortization outputs (principal, interest,
and unpaid balance), each of the mortgage calculators
on this site show the total amount you will have spent on your mortgage if you pay it off
in any particular payment period.