Tracking Mortgage Payments of Capital and Interest

When you take out a mortgage, you repay it over a predetermined amount of time.  Generally speaking, the majority of mortgages are over a 30 year life, although there is a great deal of variation in the terms of the agreements.  Either a fixed or variable interest rate is agreed upon when you enter the mortgage loan agreement which will impact the amount of your overall mortgage payments, as well as how quickly you pay off the balance.  The interest rate that is set on your mortgage greatly depends upon the prevailing interest rates currently existing in the market at the time of your home purchase, but also take into account the market where you are buying the home as well as your credit risk.   If you have poor credit history, even if you get a loan, you may have to pay higher interest than someone who has a lower risk assigned to them due to their credit history.  A mortgage loan is secured by real property and is typically repaid with monthly loan payments, which relays into lower risk to lenders than other unsecured loans. Lenders can be found everywhere, in every market, and some offer better rates than others.

Each loan payment consists of both principal (capital) payments against the outstanding balance of the mortgage and interest payments on the amount that you have outstanding on your mortgage.  The amount of each payment that relates to capital and the amount that relates to interest will fluctuate as you pay off the loan.  As the loan balance decreases, a higher portion of your mortgage payments will be applied against the capital outstanding on your mortgage.  As such, many of your earlier payments will be mostly to pay off interest to lender, while your later payments will be more devoted towards repaying the principal on the loan.

If you want to determine how much of each payment goes towards repaying the interest and how much is devoted towards a repayment of the principal, you should set up a mortgage loan amortization schedule.  This schedule will allocate each payment based upon the outstanding balance and interest rate into portions relating to principal and interest. Many online mortgage calculators are also available which assist and greatly simplify the matter.

Mortgages can be hard to keep track of if you don’t pay attention to them and devote the time and resources towards insuring that you properly keep track of your mortgage payments.  Calculate each payments to see the impact of each payment to reduce your capital mortgage payment to save money on interest in the future.

Mark Mancino NJ

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