Most homeowners pay their mortgage each month without even thinking about how much of that payment goes towards the principal versus the interest. We just accept that making our monthly mortgage payment is something we are stuck with for the next 15-30 years. 

However, there are ways to shorten the term of your loan and save yourself quite a bit in interest. But just how much time and money can you save? You can get that answer pretty easily by taking a look at your amortization schedule. 

The word “amortization” refers to the process of paying off a debt — like a home loan — over time through regular monthly payments. An amortization schedule is a table detailing each periodic payment on a loan from the first payment to the last, breaking down how much goes towards principal and interest. 

For instance, on a long-term loan like a mortgage, interest costs are much higher in the beginning, so you don’t make much progress on the principal at first. As the years go by, more of each payment is applied towards the principal and you pay less in interest. Your monthly payment does not change, but how the money is allocated does. 

Bryan Clark, senior vice president of mortgage banking for Dart Bank, says the amortization schedule is one of the most important, yet most underutilized, tools in the mortgage process. 

“This table is helpful for consumers to really understand how the borrowing process works,” he said. “Your lender can generate an amortization schedule for you, but you can also build one yourself using one of the many amortization calculators found online.” 

One of the biggest benefits of an amortization schedule is that you can play with the table to determine how much you can save if you made additional payments towards your mortgage. 
Maybe you want to see how one extra payment a year would impact your loan, or maybe you want to throw an extra $50 a month on your mortgage...whatever the amount, you can use your amortization schedule to see how much you can save. 

For example, let’s say you had a 30-year mortgage for $175,000 at 4.5 percent interest. Your monthly mortgage payment would be approximately $886, and over that 30-year term you will pay about $144,211 in interest. Now, if you pull up an amortization calculator and add in one extra payment of $886 per year, you would see the new breakdown, which would show that you could shave about 5 years off your loan term and save about $23,500 in interest. 

“It’s eye-opening to see the numbers all laid out and to see the real savings,” said Clark. “If you are a homeowner who has not given much thought to your amortization schedule, you should spend some time looking it over. It’s just a great way to be informed and really understand your loan.” 

If you have questions regarding the mortgage process, lean on a local, trusted lender. You can find a listing of area experts by visiting the Greater Lansing Association of REALTORS® website at www.lansing-realestate.com.