How to use an Amortization Chart for Reverse Mortgages
What is amortization? It is the re-payment of a loan. It usually has a time line. The longer the terms the slower the amortization which means a lower payment. A mortgage rate calculator can help and displays the rate of interest. These calculators show you how to use an amortization chart for reverse mortgages and the payments per month. This will show how much payment goes towards the principal and how much goes towards taxes and interest. Calculators available online are detailed. It displays an entire chart along with the amortization schedule. There are numerous columns for principal, payment, interest.
A loan payment contains two components:
If you do not receive a chart from your lender, you can actually make one yourself quite easily!
First, you need to know your:
- interest payment
- paying off the principal
A constant payment of a 30 year fixed loan will amortize each month over 360 months and this is normal. However, it can also work in reverse. Minimum payment options mean you pay less and will keep the loan the same size and it will not be paid off. In this case, every penny over the interest goes to the principal. So if you pay less than the interest only you could be adding to the loan! This is termed, 'negative amortization.'
Current monthly interest and principal payment.
Current outstanding balance
The interest rate
Call your lender and ask for your loan account number. Have a calculator. Use a piece of graph paper or regular paper and make five columns. At the beginning of the first column write, 'month.' On the second write, 'Monthly payment'. In the third write, 'interest'. In the fourth write, 'principal'. In the fifth write, 'balance.' In the balance column, write the balance on your loan. Under month, write the current month. Under the monthly payment, enter your payment.
We are not done yet in understanding how to use an amortization chart for reverse mortgages. After you have done the above, the hard part comes in. You will have to know the interest factor to use. In order to find that you divide your interest rate by 12 representing 12 months in a year. That is all there is to it. While it may seem complicated you can get much help from your lender and online when it comes to these charts. With a little planning and some math skills, you can know what is happening with your mortgage.
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