Loan Calculators
Loan Calculators
The amortization loan calculator is used to determine the recurrent payment amount of a loan (frequently a mortgage), based on the amortization process.
The amortization repayment structure portions fluctuating amounts of interest and principal into every payment while the total of the payment remains the same.
The amortization loan calculator also displays the actual dollar amount separately for the amount going towards both interest and principle for each payment. Furthermore, the amortization schedule is a table that manifests these calculations across the length of the loan in chronological order.
If you already know what your maximum payment amount is (usually based on your income), you can run the amortization calculation backwards to determine how much principal you can afford to borrow.
It is recommended to run this loan calculator using the same maximum monthly payment set at various interest rates before meeting with your mortgage broker. This way, you know ahead of time how much principal you can afford immediately.
Remember that this basic amortization loan calculator takes into account only the costs involved in repaying the principal and interest of a loan. Other expenditures involved with home ownership may effect the amount of money available to to you to cover loan payments. Some examples may include property tax, homeowner’s insurance, and homeowner association fees.
Other Calculations
While typically used for mortgage-related purposes, you can also use the amortization loan calculator to analyze debts, including short-term loans and credit cards.
Example: Calculate the monthly payment amount necessary to pay off a credit card in one year period, where P=current balance, i=card’s interest rate, and n=12 (12 payments).
The Loan Calculator Formula
The calculation used to arrive at the regular payment amount assumes that the first payment is not due on the first day of the loan, but rather one full payment period into the loan.
Usually used to solve for A, the loan calculator formula can be used to decide for any variable in the equation, assuming that all others are known.
The formula is:
| A | = | P |
|
Where:
A = payment amount
P = principal
i = interest rate
n = total number of payments (for a 30-year loan with regular monthly payments, n = 30 years x 12 months = 360)
