Are you familiar with the metaphor, “It’s all Greek to me?”  Referenced in Shakespeare’s play Julius Caesar, its meaning is used to express something that is not understandable.

I find this true when trying to understand mortgages!  It’s all Greek to me, yet it is a crucial part of the home buying process and a crucial part of your financial well-being.

In black and white, amortization, in lending terms, is the gradual reduction of the amount of a loan over time, through equal payments or nearly equal payments.

With a home loan, at the beginning of the loan term, most of the monthly payment goes toward interest. Interest is the fee charged for using the lender’s money.

As time goes on each subsequent payment goes toward the loan’s principal.

With or without a lesson in understanding how your mortgage works, we all understand that the end goal is paying it off.  The question is how can we do this as fast as possible?

Making an extra payment to reduce the principal balance can have a great effect on the amount of time it will take to pay off the loan, just like missing a payment will cause your loan balance to go up.

The same is true for reducing the amortization period of your loan. If you increase your regular payments, you will shorten the time it will take to pay off the loan and you will save you money in the long term.

One thing that you can do to help yourself along the way is to understand your amortization schedule or as it is sometimes referred to, an amortization table.

While your mortgage payment stays the same for the life of the loan, the structure of your payment will change each month.

And Shakespeare might still be confusing, but hopefully, we’ve shed some light on all of those numbers floating around on your mortgage statement.

Learn to love your amortization schedule by watching your equity build as your payments stay the same, year after year.

The Certo Team
55 N. Arizona Place Suite #103
Chandler, AZ 85225
602-429-6789