Amortized loans, which have been common since the Great Depression, include a payment schedule that provides for full repayment of the loan, plus interest, over a set period of time. On any statement you receive during the repayment period, the portion that has not been repaid appears as the outstanding balance, while the interest and portion of that balance you must pay to keep your loan current is the amount that is currently due.
Amortized Loans
Prior to the Great Depression, most mortgages were simple term ones, whereby you paid an agreed upon amount of interest at regular intervals, and then paid back the full loan amount at the end of the loan period. This type of mortgage led to a wave of foreclosures when money became scarce and people couldn't pay off the large balances when the loans became due, so amortized loans became common. With an amortized loan, the borrower pays interest plus a small part of the loan amount, or principal, each month. The principal eventually reduces to zero at the end of the loan period.
Amount Currently Due
The payments on a fixed rate amortized loan are the same every month, and are calculated according to the loan period, the amount of the loan and the interest rate. They include both interest and principal, but the relative proportions of these two amounts vary over the life of the loan. Some mortgages have an adjustable rate, however, that fluctuates according to one of several possible economic indices. The amount currently due may change monthly, according to the terms of the loan. A rising interest rate can mean a higher payment so that the amount that goes to principal remains the same.
Outstanding Balance
The unpaid balance of an amortized loan decreases steadily during the loan period, and can be calculated with a complex mathematical formula. However, you usually don't have to calculate it yourself. Even if your loan company didn't do it for you, many websites offer software that will perform the calculations after you enter the loan amount, loan period and current interest rate. The outstanding balance on your loan statement is slightly higher than the unpaid balance on the loan, however, because it includes the interest you owe for the month.
Impounds
Many people who take out home loans agree to impounds, which allows the lender to add a certain amount to each month's payment, hold it in an escrow account and use it to pay property taxes and insurance when they become due. Impounds, while separate from your mortgage payments, often add significantly to the amount that is currently due. You can find a breakdown of each month's payment on the statement you receive from your lender. It includes the interest you owe for the month, the amount that goes to principal and the amount that goes into escrow.
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