When getting a residential mortgage you will likely need to have a mortgage amortization table to determine a breakdown of your payment schedule over the life of your mortgage. These tables detail the distribution of your payment from the very first payment down to the final loan payment so you know exactly how much of your investment is going into the purchase of the property and how much is set aside for interest. Using this table is probably one of the few ways to determine the true value of your investment over time.
Building Equity
The table will also show how much equity you have built up in your property. You will notice that with each payment you make, the amount dedicated to principal will change. In the beginning phase of the loan, more of your payment will be used to pay down the interest but with each successive payment, more of the money will be given to pay down the principal of the loan. Therefore, the value between principal and interest will at some point reverse. This means that the rate at which you will build equity in your investment will be slow in the beginning stages of your mortgage. By studying your mortgage amortization table you can actually see how it could be beneficial it can be to make extra payments on your mortgage to be applied to the principal of your loan. This will help you to build up more equity in your home at a much faster pace. In many cases, by making just one additional payment each year, you can actually shave off years from your mortgage and even save thousands of dollars on total interest paid.
Refinancing
The mortgage amortization table can also help you to figure out if and when you may need to refinance your mortgage. There is a general rule of thumb that dictates that only a deduction of 1% on the interest rate could make a significant difference in the amount of interest you pay over the years. While each case may be different, this would be very hard to gauge without the use of an amortization schedule.
Because these tables factor in more than how much you pay, it can be difficult to calculate these factors on your own. A good table will include the amount of the loan, the interest rate, and the length of the loan. All of these factors play an important role in determining when and how to adjust your investment payments in order to get the most out of your purchase.
The more familiar you are with your new investment, the easier it will be to make wise decisions when it comes to purchasing property. That's why more and more people have seen the value of using a mortgage amortization table to guide them through the finite details of taking out a real estate mortgage.
These tables provide much more information that can be used for the savvy investor. Those that choose to take advantage of these tools will have their eyes opened and will be able to see clearly how to make the most of any property investment they make.