A straight-line amortization chart helps analyze mortgage loan payments. However, ensure that the chart you use is customized to reflect the elements of your specific loan.
Straight Line
A straight line amortization chart allows for seeing how the allocated amounts for the principal and interest change each month. Such a chart can be formatted as a table or as a graphic chart.
- A table-format chart tends to be easier to read because the actual amounts of principal and interest are listed in the table.
- A graphic chart requires finding a specific month on a chart's line and then finding the corresponding amounts of principal and interest by reading the X and Y axes in the chart.
Developing an Amortization Chart
All mortgage amortization charts are based on three pieces of information:
- Loan amount (the "principal") - This refers to the original amount of the loan.
- Loan interest rate - This is the interest rate charged for the loan. This is the yearly rate that the lender charges for lending the loan amount, and can be found on the HUD forms for the loan.
- Loan term - This refers to the number of months or years of the loan life, meaning until the loan is completely repaid.
For example, presume a 30-year fixed rate mortgage loan for $100,000 with a 6% interest rate. In the below chart, with straight-line amortization, the payment would remain constant each month at $599.55. Each month, the amount of the payment allocated to interest would decrease and amount allocated to loan principle increase:
| Month | Payment | Principal | Interest | Balance |
| 1 | $599.55 | $99.55 | $500.00 | $99,900.45 |
| 2 | $599.55 | $100.05 | $499.50 | $99,800.40 |
| 3 | $599.55 | $100.55 | $499.00 | $99,699.85 |
| 4 | $599.55 | $101.05 | $498.50 | $99,598.80 |
| 5 | $599.55 | $101.56 | $497.99 | $99,497.24 |
Creating Your Own Amortization Chart
It is possible to create a straight-line amortization chart using a spreadsheet computer program. The basic design of most amortization charts usually include the following column headings:
- Month
- Payment
- Principal
- Interest
- Balance
To create a chart on an Excel spreadsheet, each cell on the chart needs to be formatted with the calculation code to reflect the appropriate changes in the allocation of the monthly payment, as provided in your loan documents.
Amortization Calculator
This simple amortization calculator requires you to provide basic information about your loan, which can be found on your loan documents.
- Line 1: Provide the total principal amount borrowed. This is the amount originally borrowed.
- Line 2: On this line, enter the interest rate for the loan. This should be provided in whole numbers. For example, 2.25% should be entered as 2.25.
- Line 3: In this section, provide the length of the loan, meaning the total number of years the loan is to last before being fully paid. For example, a typical mortgage loan is for 30 years, so in this section you would enter "30" if that is the applicable length of your mortgage loan.
- Line 4: Enter the month in which you began paying the loan. This is usually the month in which you took out the loan, even if the initial loan payment was submitted with settlement costs, as is the case for most mortgages. If your first payment was in June, for example, insert "June" or "6" on this line.
- Line 5: Provide the year in which the loan originated. This refers to the year that the loan was taken out.
Once provided, the calculator will generate a straight line amortization chart for the loan.
Using Your Chart
Use a straight line amortization chart to gain a solid understanding of how your monthly mortgage payments are allocated from month to month. You may be surprised by the amount of interest you'll pay over the life of the loan if you stick to the original payment schedule.
