Definition
Scheduled Mortgage Payment
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The scheduled mortgage payment of a loan refers to the amount a borrower is obligated to repay each month which consist of principal and interest.
Depending on the terms of contract, paying less than the required amount can lead to deferred interest or delinquency.
It can also trigger penalty fees.
When a home loan is in a period of fixed rates, the amortization table should be able to show exactly what is the amount that needs to be repaid each month.
The mathematical equation to calculate this payment is:
P = L[c(1 + c) n ]/[(1 + c) n – 1] where
P = Monthly payment
L = Loan amount
n = Number of months
c = Monthly interest rate
When the loan enters a period of floating interest rates with monthly refresh, monthly repayment amounts will depend on the calculation based on the new interest rate.
The installment amount however, will not have huge adjustments unless there is a highly volatile interest rate environment.
The scheduled mortgage payment amount can change drastically when there is a partial redemption of loan which significantly reduces the outstanding principal balance.
In this case, the new principal balance after deducting the redeemed amount will be amortized again, or recast, to calculate a new monthly payment amount.
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