EFTA01280090.pdf

Notice of Information and October 03, 2014
Examples of Amortization of Home Loans
(Notice to Consumers under North Carolina General Statutes Section 24-1.1A(al)(1)1
Note: North Carolina law requires a mortgage lender to provide this Office of the Commissioner of Banks Notice to
a consumer who applies for a "home loan." The lender must deliver or mail this Notice to the consumer within
three business days after the lender receives the consumer's loan application or the date of loan closing, whichever
is earlier. This law defines a "home loan" as a loan (other than an open-end credit plan) for less than $300,000,
obtained for personal, family or household purposes and secured by a first mortgage or first deed of trust on the
consume? s dwelling.
Information on Home Loan Amortization
When you obtain a home loan from a lender, you will be asked to sign a note that requires you to repay the principal amount you
borrow, plus interest. You may also be required by your loan documents to pay sums into "escrow" so that your lender will have
sufficient funds on hand to pay your property taxes and property insurance premiums on your behalf as and when they become due. If
you are delinquent in making your payments, you may be required to pay a late charge. The order in which your lender applies your
payments to these various categories will depend on the specific terms of your loan documents and the manner in which your lender
administers your loan. However, as between principal and interest, most lenders will apply your payment to the interest owed before
any portion of the payment is applied to reduce the principal balance of the loan. If yours is a typical home loan, during the early
years of your loan most of your payment will be applied to satisfy your interest obligation and only a small amount will be applied to
the principal balance. However, as your principal balance gradually reduces over time, less of your payment will be applied to
interest and more will be applied to principal. The gradual process by which periodic payments affect the principal balance is called
"amortization."
Your mortgage lender or mortgage broker may offer a variety of home loans that may have different maturity dates (the final due
date) and different terms of repayment. An "amortization schedule" for your loan will show the principal amount of your loan, the
amount of your periodic payment, the amount of interest that will be collected periodically, how much (if any) will be applied to
reduce the principal, whether (and how much) the principal increases if loan payments are insufficient to pay interest, how many
scheduled payments you must make to pay off your home loan, and the unpaid principal balance after each scheduled payment is
timely made.
How your loan will amortize will depend upon the specific terms of your loan and how your lender administers your loan. Typically,
a conventional fixed rate home loan is payable in substantially equal monthly payments of principal and interest over the 15-year or
30-year loan term. For this type of loan, the amount you borrow, the interest rate and the loan term will be the most important
factors in determining your payment amount and how your loan will amortize. However, because lenders offer a wide variety of
home loan products, you should be aware that other factors greatly influence your repayment terms and how your loan will amortize.
For example:
• Some lenders offer "interest only" home loans. In this type of loan, your payment will cover only the interest that is due, and
none of your payment will be applied to principal. As a result, the entire principal balance of your loan will be due at maturity.
• Some lenders offer "balloon" home loans. In this type of loan, the required periodic payment is based on an amortization
schedule that extends beyond the maturity date of the loan. For example, a lender may offer you a 15-year loan with required
periodic payments computed to pay the loan off in 20 years. As a result, even though your required periodic payments may be
for a fixed dollar amount and you make all your payments in a timely manner, a substantial portion of the principal balance of
the loan will still be due when the loan matures in 15 years.
• Lenders are permitted to use a variety of different methods to calculate the interest due on your loan. In a typical conventional
15-year or 30-year fixed rate home loan, most lenders calculate interest on the assumption that each month has 30 (and only 30)
days and that each year is 360 days long. In other home loans, lenders sometimes determine the actual number of days the
principal amount is outstanding for each period and calculate the interest due based on a 360-day, a 365-day, or a 365/366-day
year. Although most lenders charge periodic interest in arrears, some charge interest in advance. The interest calculation method
used by your lender will affect how your loan amortizes. You should ask your lender about the interest calculation method that
will apply to your home loan.
• Most amortization schedules assume that your lender will receive payment on the exact date your payment is due. If your lender
charges periodic interest on the outstanding principal balance of your loan for the actual number of days from your last payment
until your next payment is actually received and applied to your loan by the lender, your amortization schedule will become
inaccurate the first time you fail to make a payment on the exact date it is due.
• Beware of "negative amortization" loans. In this type of loan, the periodic payments required by your loan documents are
insufficient to pay the interest as it accrues on your loan. As a result, your loan balance will actually increase, even though you
make the required payments on time.
• Some lenders offer "graduated payment" or "reverse annuity" home loans. These are special-purpose loans designed to meet the
specific needs of a small segment of homeowners. These are complicated loans that frequently involve negative amortization
and/or increasing payment amounts. These types of loans may require you to pay interest on unpaid interest-as interest accrues,
the lender may be permitted to add it to the outstanding principal balance of the loan.
Before you borrow, ask enough questions of your lender to make sure you understand how your loan will be administered and how
your loan will amortize. Ask your lender whether your payment amount includes or excludes any required escrow payments.
Amortization schedules typically ignore sums you may be required to pay into escrow for taxes and insurance.
See the four Example Home Loan Amortization Schedules on the Next Page.
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Examples of Horne Loan Amorlizsion stheooes-Nc Form MIA09 NC CommisSkirrer of Banks Rev.04,19,17
Wolters Kluwer Financs Services C 2002. 2009 Pape 1 cf 2 VMF11Fit (NCI 10907)
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Examples of Home Loan Amortization Schedules
Examples of amonization schedules arc shown for four different home loans of $150.000 on the charts below. These examples permit you, for example. to compare
how a higher interest rate will affect your periodic payment and the differences between conventional 15-year and 30-year fixed rate home loans. These examples
assume that monthly payments arc made on the scheduled due dates. Your lender may be required under North Carolina law to deliver at your loan closing. or mail
to you within three days thereafter, an amortization schedule for your loan. These examples arc for informational purposes only, and the amortization schedule for
your loan may differ based on the terms of your home loan. In addition, your actual required periodic payments may be higher than these examples if your lender
uses a different interest calculation method. requires you to make periodic escrow payments for insurance and/or taxes, or you owe late charges.
15 Years at 8%
Interest Rate: 8% Term to Maturity: 15 years
Monthly Payment: $1,433.48 Total Number of Payments: 180
The rum 12 and flail SIA ['arum. at n A foul of ISO moms of S1.4.1.3 48 or $258.CCO 4(1 alma be ma& awe he tile of Sc
Payment Number Principal Balance Monthly Payment Amount Interest Paid Principal Applied New Balance
I $150,000.00 $1,433.48 $1,000.00 $433.48 $149.566.52
2 $149.566.52 $1,433.48 $997.11 $436.37 $149,130.15
3 $149.130.15 $1,433.48 $994.20 $439.28 $148,690.87
4 $148.690.87 $1,433.48 $991.27 $442.21 $148.248.66
5 $148.248.66 $1,433.48 $988.32 $445.16 $147.803.51
6 $147.803.51 $1,433.48 $985.36 $448.12 $147.355.38
7 $147.355.38 $1,433.48 $982.37 $451.11 $146.904.27
8 $146,904.27 $1,433.48 $979.36 $454.12 $146,450.16
9 $146.450.16 $1.433.48 $976.33 $457.15 $145.993.01
10 $145.993.01 $1,433.48 $973.29 $460.19 $145.532.82
II $145.532.82 $1,433.48 $970.22 $463.26 $145.069.56
12 $145.069.56 $1.433.48 $967.13 $466.35 $144.603.21
175 $8.403.08 $1,433.48 $56.02 $1.377.46 $7.025.63
176 $7.025.63 $1.433.48 $46.84 $1.386.64 $5.638.98
177 $5.638.98 $1.433.48 $37.59 $1.395.89 $4.243.10
178 $4.243.10 $1.433.48 $28.29 $1.405.19 $2.837.90
179 $2,837.90 $1,433.48 $18.92 $1,414.56 $1,423.34
180 $1,423.34 $1,433.48 $9.49 $1,423.99 ($0.65)
15 Years at 11%
merest Rate: 11% Term to Maturity: 15 years
Monthly Payment $1,704.90 Total Number of Payment.: 1 ISO
Th fin 12 and fmal inm inx me down A fetal of 180 payments .03130190w POS.$82 00 met be mode Owl the life of the loan.
Payment Number Principal Balance Monthly Payment Amount Interest Paid Principal Applied New Balance
I $150.000.00 $1,704.90 $1.375.00 $329.90 $149.670.10
2 $149,670.10 $1,704.90 $1,371.98 $332.92 $149,337.18
3 $149.337.18 $1,704.90 $1.368.92 $335.98 $149.001.20
4 $149.001.20 $1,704.90 $1.365.84 $339.06 $148.662.14
5 $148.662.14 $1,704.90 $1.362.74 $342.16 $148.319.98
6 $148.319.98 $1,704.90 $1.359.60 $345.30 $147.974.68
7 $147.974.68 $1,704.90 $1.356.43 $348.47 $147.626.22
8 $147.626.22 $1.704.90 $1.353.24 $351.66 5147.274.56
9 $147 274.56 $1,704.90 $1,350.02 $354.88 $146 919.67
10 $146.919.67 $1,704.90 $1.346.76 $358.14 $146.561.54
II $146.561.54 $1,704.90 $1.343.48 $361.42 $146.200.12
12 $146.200.12 $1,704.90 $1.340.17 $364.73 $145.835.38
175 $9.907.09 $1.704.90 $90.81 $1.614.09 58.293.00
176 $8.293.00 $1.704.90 $76.02 $1.628.88 $6.664.12
177 $6.664.12 $1.704.90 $61.09 $1.643.81 $5.020.31
178 $5.020.31 $1.704.90 $46.02 $1.658.88 $3.361.43
179 $3.361.43 $1.704.90 $30.81 $1.674.09 $1.687.34
ISO $1.687.34 $1.704.90 $15.47 $1.689.43 ($2.09)
30 Years at 8%
Interest Rate: 8 % Term to Maturity: 30 years
Monthly Payment: $1,100.65 Total Number of Payment.: 360
Tie rum 12 and flail a% paricou age stown A foul a13611 pymenu of 31.1Cated or S396.234 00 urea be ma& awe the life al the lam.
Payment Number Principal Balance Monthly Payment Amount Interest Paid Principal Applied New Balance
I 150.000.00 1,100.65 1.000.00 $100.65 $149.899.35
2 $149.899.35 $1,100.65 $999.33 $101.32 $149.798.03
3 $149.798.03 $1,100.65 $998.65 $102.00 $149.696.03
4 $149.696.03 $1,100.65 $997.97 $102.68 $149.593.36
5 $149.593.36 $1,100.65 $997.29 $103.36 $149.490.00
6 $149,490.00 $1,100.65 $996.60 $104.05 $149,385.95
7 $149,385.95 $1,100.65 $995.91 $104.74 $149.281.20
8 $149.281.20 $1,100.65 $995.21 $105.44 $149.175.76
9 $149.175.76 $1,100.65 $994.51 $106.14 $149.069.61
10 $149.069.61 $1,100.65 $993.80 $106.85 $148.962.76
II $148.962.76 $1,100.65 $993.09 $107.56 $148.855.20
12 $148.855.20 $1,100.65 $992.37 $108.28 $148.746.91
355 $6.448.01 $1,100.65 $42.99 $1,057.66 $5.390.35
356 $5.390.35 $1,100.65 $35.94 $1.064.71 $4.325.63
357 $4.325.63 $1,100.65 $28.84 $1.071.81 $3.253.82
358 $3 253.82 1 100.65 -1.69 1 078.96 $2 174.86
359 $2.174.86 1,100.65 14.50 1,086.15 $1.088.71
360 $1.088.71 1.100.65 $7.26 1.093.39 ($4.68)
30 Years at 11%
Interest Rate: 11% Term to Maturity: 30 years
Monthly Payment $1,428.49 Total Number of Payment.: 360
The (in 12 and final in minimax we !down A iota of 360 payments of $1.428 49 ot 1514.256 40 man be mode ow, the life of the loan.
Payment Number Principal Balance Monthly Payment Amount Interest Paid Principal Applied New Balance
1 $150.000.00 $1,428.49 $1.375.00 $53.49 $149.946.51
2 $149.946.51 $1,428.49 $1.374.51 $53.98 $149.892.53
3 $149.892.53 $1,428.49 $1.374.01 $54.48 $149.838.05
4 $149.838.05 $1,428.49 $1.373.52 $54.97 $149.783.08
5 $149.783.08 $1,428.49 $1.373.01 $55.48 $149.727.60
6 $149,727.60 $1,428.49 $1,372.50 $55.99 $149,671.61
7 $149.671.61 $1,428.49 $1.371.99 $56.50 $149.615.11
8 $149.615.11 $1,428.49 $1.371.47 $57.02 $149.558.10
9 $149.558.10 $1,428.49 $1.370.95 $57.54 $149.500.56
10 $149.500.56 $1,428.49 $1.370.42 $58.07 $149.442.49
II $149,442.49 $1,428.49 $1.369.89 $58.60 $149.383.89
12 $149.383.89 $1,428.49 $1.369.35 $59.14 $149.324.75
355 $8.289.51 $1,428.49 $75.99 $1.352.50 $6.937.01
356 $6.937.01 $1,428.49 $63.59 $1.364.90 $5.572.11
357 $5.572.11 $1,428.49 $51.08 $1.377.41 $4.194.70
358 5,4,194.70 $1,428.49 ;38.45 51,390.04 $2.804.66
359 $2.804.66 $1,428.49 525.71 $1.402.78 $1.401.88
360 $1.4431.88 $1,428.49 $12.85 $1.415.64 ($13.76)
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Examples of 140the 1.0411 Amortization ScneelutenNC Boren MLA 9 NC Commissioner of Banks Rev. 04/19/07
W01144 NItividt FIn8100 Services O 2002. 2009 Page 2 of 2 VMPt 1St (NCI 10907)
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