When buying a home there are several thousand entities like a lender, government, Title Company. Same as thereare several people who help you in buying a house such as real estate agent, plot inspector, title company agent etc. At the last stage, you have to pay a closing cost which is 5% of your total property cost. After having all things with you such as a legal document of property along with property, now it’s time to pay the loan. Paying a loan is a very complicated process, Hence in this segment, we will discuss what is amortization along with amortization calculator extra payments.

The basic concept of Amortization

Amortization is nothing but a way to pay a loan. It has two parts, where the first part is principle and interest. Simply these terms are based on the principle taken at the time of the loan and gradually how much interest would come on the principle. Second is a monthly payment, we can say the standard loan is paid in all most 15 years or depends upon the repay amount of customer. Previously, when amortization had not introduced, the buyer had a complexburden on him as he had to pay the entire amount in 5 year of time which was very rapid in terms of having huge money as a loan. IT was a huge payment at one time. The loan had given for the construction purpose only and side by side there were no VA as well as FHA. Also, therewas no government agency to assure this entire thing, it was pretty risky.

Evolution of Amortization

To channelize all the process in a proper manner some smart bankers came together and innovating the concept of amortization which was good for the lender as well as the buyer. They made the path of quite easy payment ad side by side they will get their interest with abetteddefaulters. They come up with a concept that why not loan could be pay in part by part for several years. In this way,the buyer will also get more time to pay. Actually, spade by spade you will have to pay on the behalf of small asset and you will be the owner of the asset and at the same time, the burden of loan is also reduced. In Amortization first, you pay 90% of the interest and 10% of the principle, as time passes you will have to pay 90% of principal and 10% of interest. In this way bank also have benefits with the Amortization


There isan amortization table which signifies the periodic payment of the retail loan, which works on the amortization calculator. Basically, each portion is the payment for the interest and the amount which is remaining to pay is added to the principle. As we have discussed above that, in the beginning, a person has to pay 90% of interest and 10% of principal value and gradually it remains 90% of principal value and 10% of interest. In this way, the amortization calculator works and make payable to tee extra payment.