If you're like a lot of folks, it's all very well to talk about negotiating a loan. What it comes down to is, what I can pay and who'll offer me enough to buy a house for that amount. To do this, your brain soon contains words like points, buydowns, seconds, firsts, downs, biweekly and on and on. With the help of one of the many online mortgage calculators, you finally work something out, go to the title company and sign on the dotted line, many dotted lines.
Then they hand you an inch-thick packet. When you look through it you find an amortization table with lots and lots of numbers. Maybe 30 years of numbers. Man. What's that? With your vast language background (and what you remember from movies), you recall that "mort" has to do with death. Now you think, "death and taxes." But that doesn't seem to fit. So it's on to finding out what you've gotten yourself in to.
Amortization is the trimming down of a debt over a specific period of time. Some call it "whittling away at the principle." Either way, it's death to the loan, which you finally pay off. A ceremony surrounding the completion of this lifelong task is a note burning. Once again, death. But a bit of freedom for you.
An amortization table is a month-by-month breakdown of a loan including the principal payment, interest paid and the remaining balance on the note after the payment is made. Unlike the mortgage calculator you used on the net, this is the printed out, black and white version of what you actually committed to. And, also unlike the mortgage calculator you worked with, it won't change without some major financial work and a new mortgage.
If you're lucky, you have a clause that allows you to prepay, or pay extra on your principal. Then that "simple" mortgage table is obsolete, because it is based on you paying the same payment month after month, year upon year. If you pay additional amounts on your principal monthly, be sure to have it verified annually with your mortgage company to make sure those funds don't accidentally disappear. Small additional payments early in the repayment period can literally cut thousands of dollars and years off your note.
If the table just shows the "done deal", you need a mortgage calculator before it becomes one, or if you look at refinancing or debt consolidation using a home equity loan. A mortgage calculator also comes in handy to verify the number a mortgage company gives you at the end of the year. If you made prepayments on the principal and your figures are substantially different from theirs, you've got trouble.
The mortgage calculator helps you figure out really quickly just what that offer means in dollars and cents. The speed at which a calculator processes numbers is its greatest advantage. The mortgage calculator has the flexibility of allowing you to play with the figures until you find what best suits your budget before you approach a lender.
Amortization tables have one function only - to show the breakdown of your mortgage into monthly payments. A mortgage calculator, on the other hand, is a powerful tool, which calculates and analyzes any number of functions depending on the kind of mortgage calculator you use.