You just need to input a few pieces of information, and the calculator will estimate an amortization schedule for you.Īs you fill in the fields, you’ll notice that if your mouse hovers over a term for a few seconds, you’ll get a helper tip that gives you more information about that term. Our amortization calculator makes it easy for you to simulate different loan scenarios to see how much your regularly scheduled payments will be, and how much of them will go towards the principal versus interest. How do you use Ratehub.ca’s amortization calculator? So, for example, a 25-year mortgage would have 300 payments (25 years x 12 months). You’ll also need to multiply the number of years in your loan term by 12. Your monthly interest rate will then be 0.33% (4% annual interest rate ÷ 12 months). So, let’s say that your annual interest rate is 4%. To obtain your monthly payment, you’ll need to divide your monthly interest rate ( i) by 12. In order to do this, you would need to use the formula below, where i = monthly interest rate and n = number of payments: If you haven’t yet taken out a loan and wanted to estimate your monthly payment for planning purposes or to compare two different products, for example, you would want to calculate your monthly payment as well. In general, your lender will specify your monthly payment at the time that you take out a loan, making this calculation quite straightforward. Principal payment = monthly payment - (loan balance x interest rate/12 months) To calculate the amortization on a loan, you would apply the following formula: Check out the helpful video below to see how amortization periods affect your mortgage payments, then read on to learn more about amortization. You can find more information about mortgage amortization along with some examples of total interest paid over short and long amortization periods elsewhere on our website. In general, a longer amortization period means that you’ll have smaller regular payments, but you’ll pay more in interest over time, while with a shorter amortization period, the opposite is true. Is a longer or shorter amortization period better? In this case, you can have an amortization period of up to 35 years. If you are able to make a down payment of 20% or more on your home, you have a conventional mortgage and do not require mortgage default insurance. The maximum amortization period for a high-ratio mortgage is 25 years. This protects your lender in the event that you are unable to pay your mortgage and default on the loan. If you are putting less than 20% down payment on your home, your mortgage loan is considered a high-ratio mortgage and will require mortgage default insurance (often known as CMHC insurance). How long does your amortization period have to be? The total amount of time that you have to pay off the principal of a loan is called the amortization period. Other examples of amortized loans include car loans and personal loans. When the principal has been repaid in full, the loan has been paid off. ![]() Part of the payment goes towards the interest on the loan (and things like mortgage default insurance and property taxes), while the rest goes towards the principal. An example of amortization that we commonly see is a mortgage - the homeowner takes out a mortgage loan and makes monthly payments to the lender. The most widely used meaning of amortization, which is what we are talking about here, is to regularly repay a loan over time. ![]() Read on to learn more about what amortization is, how to understand an amortization schedule and how to use our amortization calculator. Whether you are taking out a mortgage or just about any other type of loan, you need to understand the concept of amortization.
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