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Using Amortization Spreadsheets to Make Big Money

Amortization spreadsheets can be intimidating when viewed from a distance, but once they are understood, they can be very useful. A good amortization spreadsheet or amortization schedule or table as they are also known, can be helpful in saving you money by informing you which mortgage offer is best for you. They can also help you to plan a strategy to pay off your mortgage ahead of time by adding a relatively small amount to your monthly payment.

Doing this will free up investment capital so you can make money, a lot of money. In fact, right now you will learn how to build amortization spreadsheets. Then you’ll see how to use them to pay off your mortgage quickly and then parlay those savings into big-time money.

What to enter into an amortization calculator

Most amortization spreadsheets are simple to construct when you are using a good online amortization calculator website. All you need to do is input the total amount of the mortgage, the interest rate and the length of the mortgage. Some amortization calculators ask for the length in years, others ask for it in months, for instance, 360 months instead of 30 years.

After you click the calculate button you’ll see your amortization spreadsheet. You will notice each month’s payment is broken down into two parts, interest and principal. You’ll also notice the interest part of the payment; at least in the early part of the mortgage, will be by far, the higher number. This is because each of these early payments consists of much more interest than principal. It is this dynamic we’re going to use to save a lot of money.

An example in big money saving

This method will work with any mortgage, but for our purposes, we’ll use these fictitious numbers. We have a mortgage of $225,000. The interest rate is 7.25%, and the length of the mortgage is 30 years. When we enter these numbers into our amortization calculator, we find the monthly payment to be $1,534.90.

When we look at the first payment on our spreadsheet, we see that out of this $1,534.90, $175.53 goes toward principal and $1,359.30 to interest. When we look at the second payment we see, $176.59 will go toward principal and $1,358.31 will go toward interest.

If we pay the second payment’s principal part, $176.59 upfront, or at the same time as the first payment, we will save the $1,358.31 in interest. Why do we save all this money? Because after we make our first payment, we will have a balance remaining on the mortgage of $224,824.48. The difference between how much interest we pay for borrowing this amount of money for 359 months and 358 months is $1,358.31. So, by paying $176.59 with the first month’s payment, we will now be on time to pay this mortgage in full in 358 months instead of 359. Yes, this is amazing!

Now, if we go on down the line paying the principal amount of the next payment due, ahead of time each month. We will be saving the corresponding much higher interest charges.

It does get a little more expensive.

As time goes on, the principal payments get higher and the interest gets lower. Still, after two years, the 24th payment, the principal is only $201.61, and after six years, the 72nd payment the principal is still $269.20.

If we stopped paying our principal payments ahead at this time, we will have knocked three years off of the time it would take to pay our mortgage off in full. This would happen because we would have paid three years on time and three years ahead of time.

Payoff a 30-year mortgage in 15 years

What if we want to pay off the mortgage in 15 years? Here’s the secret. Go to the 180th payment. Here, you’ll see that principal part of the payment is $515.93. If we add this amount onto each of our payments from the first payment of our mortgage to the 180th payment of our mortgage, the mortgage would be paid in full in 180 payments, or 15 years.

$515.93 may seem like a lot to pay upfront, but even if you were to take the principal part of payment number 55, $243.00, and add it on to each payment, you would have your mortgage paid more than 10 years sooner.

Summing it up, you can use this as an approximate formula: On a 30 year mortgage, add to each payment, the amount equal to the principal part of payment number 180 and you will have the mortgage paid in 15 years. Or, add to each payment, the amount equal to the principal part of payment number 55 and you will have the mortgage paid in 20 years. While this formula doesn’t work perfectly for interest rates over 10%, for interest rates around 7%, it is fairly accurate. Now, let’s see how to turn that savings into wealth.

Invest the savings

You could, of course become a real estate investor, but for simplicity sakes, let’s just say you invested $1,534.90 each month in a managed fund that returns 10% yearly. After 10 years you would have $318,127.75. Also, don’t forget you would have a house, which would be paid in full. I’d say you’re pretty close to being rich and it all started with learning how to use your amortization spreadsheet.

By: Edward Lathrop

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Posted in Finance · January 30th, 2010 · Comments (0)

A Mortgage Calculator Can Help You Save Money

Everyone is always looking for a few good ways to save money and I have one of those ways for you. If you own a home or you’re buying a home then a mortgage calculator can calculate the different ways for you to save money on your monthly payment.

First of all, make sure you have the lowest interest rate. If you don’t then check to see if refinancing your mortgage is a good option for you and it could save you money. If you’re happy with your current monthly payment then I suggest adding a little bit of money to the principal each month. Use a mortgage calculator to see what it will save you over the years.

Adding money to your principal is something that a lot of people talk about but don’t seem to understand as well as they should. Any interest calculator will show you exactly what you’ll save over the length of you mortgage. Sometimes you can even see an amortization schedule which breaks down each monthly payment into principal and interest.

The amortization schedule is very helpful because you can see a running balance of your mortgage. It will show you how much you owe the bank at any given time. It also shows how much principal goes toward each monthly payment so you know how much you’ll be paying down every month.

You can also use a mortgage calculator to show you how much your monthly payment would be if you lowered the loan term to 15 years instead of 30 years. If you look at how the payments are amortized it will show you the difference in the amount of principal in each payment as well. It’s very important to know all of these things so that you can confidently know how your extra cash is saving you money.

You can use these calculator for your car loan, personal loan and even a credit card loan. They will show you how quickly you’re going to pay them off and how quickly you could pay them off with extra principal. It’s best to pay the longer term loans first because you’re paying the most interest on them.

By: Chris G Bell

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Posted in Real Estate · November 28th, 2009 · Comments (0)

What’s In A Home Mortgage Calculator?

So what is a home mortgage calculator? Simply put, this calculator is a great tool for anyone in the real estate market. But what does it do? It helps you calculate figures related to your mortgage. If you are in the real estate market, you need one. It speeds up all the calculations by using formulas unavailable in a standard calculator.

Different Flavors

There are many variants of the home mortgage calculator. You can choose from many different types. The most basic gives you the payment after you enter the value. No frills and no fuss. All you need is a fixed time period, simple interest, and a fixed monthly payment.

Then there is the home mortgage amortization calculator. It is simply the basic home mortgage calculator with the addition of an amortization schedule. This schedule shows how much of your payments finances principal and how much finances your interest. But, any payment figures yielded will not have any insurance or taxes factored in.

Current homeowners use a home loan mortgage calculator to help them decide about refinancing to a lower interest rate. This calculator gives you the total projected savings in payments and interest. Some will even factor in closing costs.

Step It Up

If you are lucky enough to own multiple homes, you will be using a multiple home mortgage calculator. This type of calculator allows you to determine interest rates of multiple loans at the same time. Home builders are a common class of users for this type of calculator. Owners of rental or vacation properties are another class.

An advanced multiple home calculator is very complex and is used by banks and financial institutions. It can calculate the blended rate of up to four loans in a month and then yields an average blended rate by averaging the differing rates over the total length of all the loans. Some can even calculate loan payments of up to 30 years.

An interest only home mortgage calculator is perfect for the homeowner that is thinking of paying a little more than is required by his monthly payment. It displays how much more per month the homeowner would have to pay to reduce the loan length.

A home mortgage qualifier calculator basically tells you how much mortgage you can afford. It will need information such as income and expenses.

An adjustable rate mortgage payment calculator can derive new payments as rates change. Obviously, this is the type of calculator favored by people with an adjustable rate mortgage.

A balloon payment home mortgage calculator relates to a payment that is made to pay off the entire loan. This calculator helps you determine whether this is a viable option for you. A balloon mortgage is generally short term but the payment is based on a long term. The loan balance is paid off at the end of the period

As you can see, you have a lot of choices depending on your situation. Hopefully, you will use the right type of calculator given all the information above.

By: Rony Walker

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Posted in Real Estate · September 12th, 2009 · Comments (0)

Five Ways to Benefit From Free Home Loan Calculator

The influence of technology and of the internet can be seen and felt everywhere these days, even in the housing market. An incredible 80% of home buyers now use the internet for at least part of their search. In response to this a large number of home loan calculators can now be found online. Although all these home equity loan calculators have slightly different features they all share some basic functions and provide a valuable insight into the home mortgage process. But what are these valuable functions that they perform? Let’s take a look.

Monthly payment

A home loan calculator is able to calculate monthly mortgage payments. All you have to do is input the length and total amount of your mortgage, along with the starting date, interest rate and the program will give you a monthly payment figure.

Some additional features that you will be able to find on various version of a home loan calculator are; how beneficial it might be to make extra or increased monthly payments and how quickly you would be able to pay off your loan if you did so.

Amortization

A home mortgage loan calculator can also help you calculate your amortization schedule; regardless of whether or not this schedule is based on pre-payments you can still get a monthly figure.

This is calculated by use of the following data; the amount borrowed, the term, and the annual rate of interest. Once the monthly figure has been calculated the amortization schedule can be created.

Bi-Weekly Mortgage

These online calculators can also help you figure out additional payments by doing some bi-weekly mortgage payment calculations. These are fairly painless ways of making additional payments which can save you paying interest and thus shorten the term.

The data that is needed to do this is the balance of the loan, the annual interest rate and the amortization period. Once these have been inputted it is simple for the program to offer you the required information.

Scenarios

As well as offering you these hard figures these home loan calculators can also help with answering ‘what if?’ queries. It is possible to make comparison between different possible actions to determine which scenario is better for you. For example, you can work out how the size of your initial down payment will affect the amount of monthly repayment.

Missing Variables

Home loan calculator can also estimate things like; how much money you would have to earn in order to afford a particular mortgage.

There are so many good home equity loan calculators to found online that you just need to enter the term into your favorite search engine and you will be rewarded with thousands of choices. Once you have found one that you are comfortable with it will become a good friend helping you answer the questions you have about making the right decision on a good home mortgage.

By: Maria Mbura

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Posted in Finance · July 4th, 2009 · Comments (0)

What Is Amortization?

Understanding what amortization is can be very important when you are purchasing a home for the first or the tenth time. In fact, if you do not know what you are signing on those home loan papers, you shouldn’t sign them at all. Yet, learning about this and other features of the home loan is not hard to do. It’s not a foreign language, just a language that you need to learn in order to purchase a home. The good news is that you will learn most of what you need to know about the mortgage you are about to sign right here on the web.

Amortization is the factoring of a lump sum payment over time. For example, in the home loan, you will work with a lender that will pay for your home in full to the seller. The funds are secured by the home and you must pay them back over the course of time, as defined in the terms of the loan. It is the distribution of the funds into smaller, installment payments over the course of time. When you purchase a home this will be figured out in the schedule that is provided with the home’s loan paperwork.

In an amortization style loan, the funds of the installment payments are broken into pieces that are then applied to the principle and the interest of the loan. In other types of payment systems, this is not the case. But, in such things as a home loan, the payment is broken into how much will be paid to the principle of the loan and how much will be paid on the interest that is due on the loan.

In home loans, the amortization schedule will show you how much of the loan’s monthly payment is going to the principal amount as well as how much is going to the interest that is on the loan. In home loans, this amount is broken down unevenly. In the first years of the loan, the homeowner will pay back a large amount of money each month to the interest side of the loan and a smaller to the principal. As time goes on, this will equal out and then shift to being more repayment to the principal than the interest. This is defined as to how much for each month in this schedule of payments made.

In order to determine just how this will happen over the course of time, you will want to use a mortgage calculator which can be found on the web. These are free of charge to use and have no obligation tied to them. In any case, by punching in the information to the loan that you know, such as the interest rate, the terms and the principal amount borrowed, you will learn just how much interest versus principal will be on the loan. This can also be helpful in allowing you to compare interest rates, compare the amount of monthly payments as well as compare the various terms of the loans you are applying for. Amortization is a very important factor in determining just how much you will pay for your home.

By: Arseniy Olevskiy

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Posted in Finance · October 20th, 2008 · Comments (0)

Loan Amortization Schedules

An “amortization schedule,” in general, is a record of loan or mortgage payments. This record includes the payment number, date, amount, breakdown of principal and interest, and the remaining balance owed after the payment. An amortizing loan’s periodic repayments contain an amount designated for the reduction of the principal, so that the balance will eventually be reduced to zero. The time necessary for the balance to reach zero is calculated in an amortization schedule.

What is Fixed Rate Amortizing Loans?

The monthly payments for interest and principal remain consistent and never change in fixed rates. The monthly payments will typically be stable even if property taxes and homeowners insurance increase. In a fixed rate-amortizing loan, the interest rate remains fixed for the life of the loan. The monthly payments remain level for the life of the loan and are prearranged to pay off the loan at the end of the loan term. An example of a fixed rate loan is a 30-year mortgage that takes 22.5 years of level payments to pay half of the original loan amount.

Importance of Principal and Interest in Amortization Loans

The method in which the principal and interest are applied is very useful to understanding amortization loans. For example, in an amortization schedule, the majority of the payment applies to interest early in the loan, with a small amount applied to paying off the principal. As the loan matures and there is less principal remaining to be repaid, more of the payment is applied to repaying the principal since there is less interest owed to the lender. Only a small amount of interest is paid by the monthly payment by the end of the loan, and most of it applies to the principal.

By: Richard Romando

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Posted in Real Estate · July 13th, 2008 · Comments (0)

Monthly Loan – Learn About Your Options

A monthly loan is the short term process kind of loan and you can even apply online through the internet. There are lots of people looking for a short term loan since it is an easy way that an applicant can acquire cash and have the time to pay it back. Most lenders or financing institutes provides fast and secure on online application process in an easy and convenient manner.

Those who you have bad credit history or good; you can apply this kind of loan for a minimum of $100 – $1,500 and you can pay in an easy monthly installment plan. Although this monthly loan come with different terms and rates so it is important to shop around first to compare the interest rates and terms that suits your needs.

Monthly loan allows you to get what you need, so then you have to save for your monthly payment. In this type of loan is that, you pay interest on the loan and pay little more in the end to get what you need. Take note, if you are satisfied with the interest rates and if you are patient enough to wait for the interest to drop, then that’s the time you take your loan. You have to consider watching the rates trends.

In monthly loan, your amortization schedule is by monthly payment plan, use to pay off the loan and that depend on how many months you want to pay your loan. Just remember that the longer you pay off your loan, the more money you have to waste for the interest. So you need to think and plan for this before jumping to have a monthly loan.

Usually, the amount loan in this scheme determined by financial institution or lender considering the applicants credit score and capacity to pay. Although this monthly loan can be helpful to you when in time you really need money for emergency purposes. Be aware that the interest rate on a short term loan is a little bit higher. If you have a good credit score, then you are lucky since it gives a big impact on your monthly payment loan in terms and rates.

One of the requirements for monthly loan is your credit reports and you have to prepare that. Get at least 3 copies of your credit report from each of the major credit reporting agencies to check if there are any error or mistakes, and if there is a mistake then you have to fix it before bringing it to the lender.

Here are 3 choices to choose for your monthly loan:

Pay extra on the loan with the highest cash flow factor, if it is convenient for you. Pay extra on the loan with the highest interest rate. Pay extra on the loan with the smallest balance, if you find it more suitable for you.

The choice to loan is in your hand and it is your decision which lender you want to have for your monthly loan. If possible, find one with interest rates that are convenient to your pocket and easy to your financial capability.

By: Gordon H. Smith

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Posted in Finance · March 18th, 2008 · Comments (0)

All About Useful Amortizations

Applying for a loan can be a daunting task for a consumer. Everyone worries about the prime lending rate, loan terms and such. So it is important to know a little about how these things are calculated.

An amortization table is exactly what you need to look at before you take out any loan. Ask your lender to show you one prior to the signing.

An amortization schedule is a report that spells out in detail the effects of each payment on a loan throughout the life of that loan. This is typical of a mortgage loan since they are long term at 25 to 40 years, but can be used on any type of loan. Car loans, personal loans and student loans can all be reviewed using an amortization schedule.

Every loan is split into two pieces: the principal (what you are borrowing) and the interest (what you pay for the loan). An amortization table breaks down each payment and tells you how much of your payment is going to interest and how much goes towards paying down the principal.

At the beginning of the loan, a large part of the payment goes towards interest with very little going to the principal pay down. The amount going to the principal increases as the term progress Usually, the final payment is somewhat lower than the previous ones.

Additionally, the amortization chart shows interest paid to date, principal paid to date and principal remaining after each payment.

As you can already see, this is a valuable tool for the savvy consumer to properly decide on the right loan deal.

The formula is very involved and looks like this where P=Payment, I=interest and n=number of payments:

P= I x principal x (1+I) x n / (1 + I) x n

You could try that for your self or just use one of the many free amortization calculators like the one at http://www.amortization-calc.com/.

Aside from getting this information from a lender, there are quite a few companies that sell amortization software like Slateboard’s Quick Calc Pro Amortization software. See it at http://www.slateboard.com/pro_quikcalcpro.htm

With the software in hand, you could easily preview the financial impact of any loan you are considering. Look for the best rate, put it into the calculator and figure exactly what the payments will be for a given term.

This is especially useful when considering a re-finance or re-mortgaging. What happens is that all of the interest paid on the original loan is lost. The re-finance stars the process all over again.

There are also several different types of amortization schedules including linear, declining balance, annuity, bullet (all at one time) and increasing balance (negative amortization). Of these, the most common one is linear.

Almost any financial web site has calculators available freely. Simply Google “amortization calculators” and you will see a plethora of free ones to choose from. Software like that mentioned above is also available openly either at your favorite software store or online. Again, just Google “amortization software”.

A little knowledge goes a long way and using an amortization schedule is good preparation and even better foreknowledge.

By: Rita Lambros-Segur

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Posted in Real Estate · July 6th, 2007 · Comments (0)

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