Understanding your mortgage payment

The mortgage payment calculator is provided only as a means of estimating your monthly mortgage payments based upon a desired rate of interest. Simple compound interest formulas are applied and your monthly payments are shown amortized over the entire life of the loan.

You will notice, that as expected, your principal paid with each month's payment increases. Moving in tandem you will notice that the amount of your monthly payment paid towards interest also decreases. This is the desired outcome because you are building equity in your home. The equity you have in your home is your original loan amount minus your balance. Equity in the home is value in the home that is yours for life or until you sell the home when it can become cash or be puts towards the purchase of another home. It should be noted that because each year you pay less interest, your tax deduction on interest payments will decline gradually each year you own the home. While the change is never drastic unless you make extra payments, it is good to understand and expect.

Experiment with the calculator varying the loan term between 15 and 30 years. You will notice that a 15 year loan saves a bundle in interest expenses but the monthly payments required are much larger.