15-Year Fixed Rate Mortgage

The Standard (Conforming)

 Each year the limit is set for what is considered a conforming loan.  This is set by FNMA, Fannie Mae, and is based on housing prices, mortgage default rates and other economic indices. This home mortgage loan is the based on its cousin, the 30 year fixed. This was designed for those borrowers and lenders which were inclined have a less than 30 year loan.  Because the commitment is shorter the rate of interest is usually lower.  Its attributes include stability and predictability.  No ups and no downs in mortgage payments because, as the name implies, the interest rate stays the same.  All payments are the same except for the final payment.

Monthly Payment Schedule

 Below we have laid out the payment schedule that would be commensurate with a $100,000, 15-year mortgage at a rate of interest of 6.75 percent per annum.  The method of calculation seems to be misunderstood or at least "little understood."  Let's examine just how the interest and principal reduction work.

The Math

 After making mortgage payment # 1 we can calculate the interest portion of our payment as follows: 6.75% x the mortgage balance before the payment is made, $100,000 = $6,750, divide that by 12 months and we end up with $562.50 interest. Next subtract that from our payment of $884.91 and there is $322.41 left. This is the portion that goes to reducing the mortgage balance.

Mortgage payment # 2 is the same except we need to use the balance after payment # 1 or $99,677.59 x 6.75% = $6728.24 divided by 12 months = $560.69, subtract that from our mortgage payment and we have $324.22 to again reduce our mortgage balance.

This continues each month.  The interest portion goes down and the principal reduction goes up.  The final payment is always less than the others.  The reason is that when the amortization calculation occurs there is almost always a fraction beyond cents (e.g., $884.909462254021277 is the actual calculation for our loan) and this is rounded up.  This makes the last payment smaller than the others because of the miniscule additional principal reduction.  Otherwise the final payment would be larger than the others and the loan, by definition, would be considered a "balloon" mortgage loan.

Mortgage Amortization Schedule 15-year fixed mortgage

Mortgage payment #

Payment amount

Interest portion

Principal reduction

Mortgage balance

Payment # 1	884.91	562.50	322.41	99,677.59
Payment # 2	884.91	560.69	324.22	99,353.37
Payment # 3	884.91	558.86	326.05	99,027.32
Payment # 4	884.91	557.03	327.88	98,699.44
Payment # 5	884.91	555.18	329.73	98,369.71
Payment # 6	884.91	553.33	331.58	98,038.13

Payment # 178	884.91	14.77	870.14	1,754.81
Payment # 179	884.91	9.87	875.04	879.77
Payment # 180	884.72	4.95	879.77	0.00