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30-Year Fixed Rate Mortgage
Conforming Limits
Each year the limit is set for what is considered a conforming loan. This is set byFNMA, Fannie Mae, and is based on housing prices, mortgage default rates and other economic indices.
The Standard
The 30-year fixed home mortgage loan is the basis for all home mortgages. 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.
Amortization Explained
Below we have laid out the payment schedule that would be commensurate with a $100,000, 30-year mortgage at a rate of interest of X% 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: 7% x the mortgage balance before the payment is made, $100,000 = $7,000, divide that by 12 months and we end up with $583.33 interest. Next subtract that from our payment of $665.31 and there is $81.89 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 $99,918.02 x 7% = $6,994.26 divided by 12 months = $582.86, subtract that from our mortgage payment and we have $82.45 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., $665.3024952 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 for the 30-year fixed conforming home loan
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Mortgage payment # |
Payment amount |
Interest portion |
Principal reduction |
Mortgage balance |
|
Payment 1 |
665.31 |
583.33 |
81.98 |
99,918.02 |
|
Payment 2 |
665.31 |
582.86 |
82.45 |
99,835.57 |
|
Payment 3 |
665.31 |
582.37 |
82.94 |
99,752.63 |
|
Payment 4 |
665.31 |
581.89 |
83.42 |
99,669.21 |
|
Payment 5 |
665.31 |
581.40 |
83.91 |
99,585.30 |
|
Payment 6 |
665.31 |
580.91 |
84.40 |
99,500.90 |
|
Payment 7 |
665.31 |
580.42 |
84.89 |
99,416.01 |
|
Payment 8 |
665.31 |
579.93 |
85.38 |
99,330.63 |
|
Payment 9 |
665.31 |
579.43 |
85.88 |
99,244.75 |
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Payment 10 |
665.31 |
578.93 |
86.38 |
99,158.37 |
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Payment 11 |
665.31 |
578.42 |
86.89 |
99,071.48 |
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Payment 12 |
665.31 |
577.92 |
87.39 |
98,984.09 |
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Payment 349 |
665.31 |
44.80 |
620.51 |
7,059.80 |
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Payment 350 |
665.31 |
41.18 |
624.13 |
6,435.67 |
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Payment 351 |
665.31 |
37.54 |
627.77 |
5,807.90 |
|
Payment 352 |
665.31 |
33.88 |
631.43 |
5,176.47 |
|
Payment 353 |
665.31 |
30.20 |
635.11 |
4,541.36 |
|
Payment 354 |
665.31 |
26.49 |
638.82 |
3,902.54 |
|
Payment 355 |
665.31 |
22.76 |
642.55 |
3,259.99 |
|
Payment 356 |
665.31 |
19.02 |
646.29 |
2,613.70 |
|
Payment 357 |
665.31 |
15.25 |
650.06 |
1,963.64 |
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Payment 358 |
665.31 |
11.45 |
653.86 |
1,309.78 |
|
Payment 359 |
665.31 |
7.64 |
657.67 |
652.11 |
|
Payment 360 |
655.91 |
3.80 |
652.11 |
0.00 |
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