I made my first mortgage payment on December 15th, which is 2 months and 12 days after closing on my condo. I used the two and a half months with no payments to build up my cash reserves, pay for furniture purchases and start saving for retirement. Now that I have started making mortgage payments, I’ve decided to update my amortization schedule (see below) with the official loan value, interest rate and monthly payment. I originally posted an estimated amortization schedule, along with information to create your own amortization schedule.
An amortization schedule is very important to create and interpret, especially when deciding whether or not to refinance. With the dropping interest rates, I may be afforded the opportunity to refinance at an interest rate below 5%, which would decrease my monthly payments by over $200 and allow me to make extra principal payments.
Amortization schedules allow you to see how much interest you will be paying over the life of your loan. They allow you to see how much extra principal payments decrease the length of your loan, as well as the amount of interest you pay.
As you can see from above, my first month’s payment was $1,392.75. $1,178.13 went towards interest, while only $214.63 went towards my principal. The paltry amount that went towards my principal makes me want to make additional payments towards principal to help build more equity in my condo. I now have to weigh whether or not I want to pay a little extra towards principal or save for my retirement. At least initially, I think the retirement savings will win.
In the near future, I will be playing around with my amortization schedule in excel to see how much extra principal payments may benefit me. Also, I will be looking at how decreased interest rates will enable me to save more for retirement and pay more towards my principal.