Understanding Your Mortgage Amortization
When you take out a mortgage, your monthly payments are split between paying off the original amount you borrowed (the principal) and the cost of borrowing that money (the interest). The Amortization Schedule provided above mathematically models this process, illustrating why making extra principal payments early in your loan can save you tens of thousands of dollars.
Home Loan FAQ
Why does the interest seem so high at the beginning?
Mortgages use a standard amortization formula where interest is calculated based on the remaining balance. Since your balance is highest in Year 1, the interest portion of your monthly payment is also at its peak. Over time, as you pay down the principal, the interest portion shrinks.
What is Private Mortgage Insurance (PMI)?
If your down payment is less than 20% of the home's purchase price, conventional lenders will require you to pay PMI. This insurance protects the lender—not you—in case you default on the loan. PMI adds a monthly premium to your payment until you reach 20% equity.
Are Property Taxes and Insurance included?
Our calculator computes the core "P&I" (Principal and Interest). Your total monthly housing expense will also include property taxes, homeowners insurance, and potentially HOA (Homeowners Association) fees. Lenders refer to this complete package as PITI.