An amortized loan payment is a flat payment which completely pays off a loan in a predetermined period of time. For long term loans like mortgages, it is helpful to understand how the loan amortizes. The amortization is every payment is allocated to principal repayment and interest to the creditor. An amortized loan repayment program is usually determined using an online mortgage calculator or spreadsheet program with a mortgage template. The payment and amortization amounts can be calculated using a calculator with the capability to perform calculations that were empirical.
Compute the monthly interest by dividing the annual interest. This amount will likely be designated R. The loan amount will be P, and also the amount of payments will be N.
Compute the monthly payment. R is split by a denominator calculated by taking (1+R) into the negative exponent of N and subtracting the result from 1. The fraction of R divided by the calculated denominator is multiplied by P. The result will be an amortizing monthly payment.
Figure out the interest and principal for the first monthly payment. The interest is P times R. The principal is the monthly payment minus the curiosity.
Figure out the loan balance. Subtract the main of the initial payment . The result will be the loan balance after the initial payment, branded B.
Calculate interest and the principal for the next payment. The monthly interest rate, R, is multiplied by B to the interest of the next payment. Subtract the new interest level from B to the principal repayment from the next payment.
Repeat the interest and main calculation for every new loan balance until all the payments are calculated and the loan balance, B, is zero.