Taking out a mortgage is a huge investment. In addition to the money you’re borrowing, you’re going to be paying a ton in interest. And if you’re a first-time homebuyer, the interest amount might startle you.

That’s why before you sign any papers, it’s important to see how much you’re going to be locked into paying each month and how much you’ll pay in total. Our P&I calculator can help by laying out all of the numbers for you.

But before we get to the calculations, let’s go over some basic terms.

Principal

Principal is the amount of money borrowed. This figure does not include interest. So for example, if you take out a $300,000 mortgage with a 6% interest rate, your principal is still $300,000.

Interest

Because a bank won’t lend you money for free, you’ll get an interest rate when you take out a mortgage, and that figure is determined by a number of factors. Your interest payment is essentially the cost of borrowing the money, and depends on the size of your loan and what your rate is. This payment will be included with your principal.

Amortization

Amortization is simply a sliding scale that shows how much of your monthly mortgage payment is going towards principal and how much is going towards interest. During the beginning of your mortgage term, your payments will go mostly towards interest. That’s because your interest will keep building until it’s paid off – but the principal amount will stay the same.

Calculating principal and interest

You can look at your amortization with our handy P&I calculator! It’s easy. Just crunch the numbers for your loan amount, interest rate, and loan term, and you’re good to go. You’ll even get a full amortization schedule breaking down your monthly payment throughout the life of your loan.

We’ve also got a ton of other mortgage calculators! So come to ditech, and let us crunch the numbers for you.

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