How Do You Make a Home Loan Amortization Schedule?


Quick Answer

Consumers make a home loan amortization schedule by subtracting monthly interest payments from starting balances to determine the principal paid and subtracting the principal paid from the remaining balance to come up with a new starting balance, reports About.com. An online calculator can figure an amortization schedule automatically, states Bankrate.

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Full Answer

Amortization schedules only work for loans made for specific periods of time with fixed payments, according to About.com. To create a home loan amortization schedule table, a consumer starts with the entire amount of the loan and divides by the total number of months allowed to pay off the loan to determine the loan's monthly payments. Most of the amount of early monthly payments goes toward the interest, while payments on the principal remain small, but gradually the consumer pays less for interest and more to pay off the loan's principal, states Bankrate.

Although a consumer can make a simple amortization schedule by hand, using an online calculator enables more complex calculations, suggests Bankrate. For instance, home buyers can calculate the total amount of principal and interest paid to date, the total amounts paid in specific years, and how much principal and interest remains to be paid. Calculators also help determine hypothetical amortization schedules if the consumer makes extra payments on the loan or refinances to pay it off in less time.

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