| Period | Payment ($) | Principal ($) | Interest ($) | Balance ($) |
|---|
The payment on a fixed-rate mortgage is calculated using the formula
M = P [ i(1+i)^n ] / [ (1+i)^n – 1 ] where P is the loan
amount, i is the periodic interest rate, and n is the number
of payments.
A mortgage amortization schedule breaks a home loan into a series of equal payments. Each installment pays the interest charged for the period and reduces a portion of the principal, steadily shrinking the balance.
Choosing weekly or fortnightly payments chips away at the balance more often, which can trim overall interest. Making additional extra payments further accelerates payoff and saves even more money over the life of the loan.
For a $250,000 mortgage at 4% interest over 30 years, the monthly payment is about $1,193.54. Over the life of the loan you would pay $179,673.77 in interest and $429,673.77 in total. The first payment includes $833.33 in interest and $360.21 toward principal, leaving a balance of $249,639.79.