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What is an amortization table in Home Loan? How to understand home loan amortization table?

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An amortization table is a chart that lists the periodic loan payments and is inclusive of the principal amount as well as the interest amount, which forms the basis of each monthly installment till the end of the loan term. Amortization tables are standard for installment loans, which have the payoff dates known at the time of the sanction of the loan. Both borrowers and lenders use them for assessing home loan repayments.

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Amortization table reveals the true cost of buying a home with regular home loan repayment installments over a period of time. The earlier home loan installments mostly go in repaying the interest on the loan. As a result, the percentage that covers the loan’s interest decreases with every installment. By the end of the tenor, most of the payment is directed to cover the principal. Borrowers can avail discounted interest rates if they choose to reduce the amortization period of their home loan. However, as doing so considerably increases the monthly payment amount, only individuals who can maintain a higher level of monthly payment should consider it.

A home loan amortization table can be obtained by using a home loan EMI calculator. The key components of the table are:

  1. An installment number, which is a unique serial number with the payment details mentioned in the corresponding rows.
  2. The due date for each loan payment.
  3. The opening principal, which indicates the standing principal amount at the beginning of the month on which the interest is subject to be charged.
  4. The installment amount, which is the EMI repayment amount that changes with the fluctuations in interest rate over several years.
  5. The principal component of the installment, which is the component of the EMI that goes into paying the principal amount of the home loan.
  6. The interest component of the installment, which is the component of the EMI that goes into paying the interest on the opening principal of the home loan. The interest component is more initially; however, it keeps decreasing over time.
  7. The closing principle amount, which indicates the principal amount remaining post the payment of the monthly EMI. The opening principle of the following month is the same as the closing principle of the last month.
  8. The interest rate per annum, which is also known as the home loan interest rate that varies based on the lender.

The home loan authorization table is important to take into account when applying for a home loan. It presents a clear picture of the home loan payment schedule and as well as assists in understanding the home loan repayment process. With a better idea of the final cost of buying a particular home, it becomes easier to make an informed decision.