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What is Mortgage Amortization?

January 22, 2016 by Ricardo Leave a Comment

mortgage amortization

The road to financial freedom can be a long one. Purchasing a home early in your life is one surefire way to get there just a bit faster. In this post, we’ll explore a necessary concept in mortgage finance: amortization.

Although the word “amortization” may be a little intimidating, it is a straightforward concept.
Amortization is the process of paying down a loan over a set period of time, usually with an interest payment included.

Once you close on your home and move in, you’ll enjoy one month of your home without paying the mortgage. This is because mortgages are paid in arrears, which means you pay for it after the fact.

When you get your first mortgage bill (or it’s deducted from your banking account), the total sum will be comprised of two parts:

  1. Principal, which is money that directly pays down your loan balance.
  2. Interest, which directly pays down the interest you owe on the loan.

If you look at the mortgage amortization chart below, you’ll see how these two components work together over time. For the majority of doctor loan—and conventional mortgages—you’ll start out paying more interest. The amount you pay for interest will gradually decrease over time. The amortization schedule determines the percentage of funds that pay down interest versus principal.

Sample Amortization Schedule

doctor loan amortization schedule

Let’s say you borrowed $325,000 through a doctor loan lender at 4.30% over 30 years. Take a look at the first row above, highlighted in yellow. Your first payment would be $1,608.33. Of that amount, a whopping $1,164.58 would go towards paying down the interest portion of the loan. The principal would be paid down by a mere $443.75.

Will I always pay more interest?

As the loan matures, you’ll start paying more towards your principal than interest. In this example, things don’t tip over until payment 168, when you’ll pay $801.91 towards interest and $806.42 towards the principal.

What can I do about this?

For this reason, we recommend paying one extra (one month) payment per year. This can save you a significant amount of money over the life of the loan and help you navigate a more comfortable ride down the road to financial freedom.

Read more about how to get a physician loan here.

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“My husband and I used Doctorloanusa.com to obtain a physician loan for our new house. The lender that we were connected with was wonderful and went above and beyond our expectations. We love our new house and we have you to thank for this mortgage program. I have referred several of my friends to your site, and specifically to the physician loan lender that helped us.”

– Dr. Bryant

“Our physician mortgage lender was absolutely amazing throughout the process. He made himself available at all hours of the day to help us with whatever we needed. We looked at several other companies and their service could not compare to our experience with him.

Most other companies did not understand our situation as new physicians with medical school debt, but he made the mortgage process easy and gave us a great doctor loan package. We could not be more happy with our experience!”

– Doctors Jessie & Bill L.

“We want to thank you both for all of your hard work on our doctor loan.  You were timely, efficient and even had a sense of humor! Awesome.”

– Dr. Voni S.

“We are moving in on Friday and we are so excited. This is a life-changing event and our dream home could NOT HAVE HAPPENED if it was not for all your hard work, especially in our unusual situation. Thank you so much for working to get the loan and you are OUR HERO!.

– Dr. Ellen G.

“Thank you so much!  I have been through this process before and I can say that this was a much smoother process and I credit you with facilitating that. The home we purchased is exactly what we wanted and where we wanted it. This would not have happened without your help and mortgage program.

We run across many people who are in the same position as Gaby and I – relatively fresh out of training, a lot of earning potential, but not a whole lot of savings… I will gladly give your name to them if I learn they are shopping for a physician loan. Thank you again!”

– Dr. D.F.

“You and your team did an outstanding job within such a short amount of time. Thanks for making it happen! Kudos!”

– Donte D, REALTOR®

“Thank you so much again for working so diligently with me to obtain our new home.  We had a setback with the moving company but finally got our belongings back. We are settling into the new home. Thanks again!”

– Dr. Geoffrey M.

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