how to create an amortization calculator

How to Create an Amortization

Calculator Sid Macatol

Dec 10, 2010 Sid Macatol - How to Create an Amortization Calculator

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Amortization?


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. . . what you pay the bank monthly for your loan

What Loan?

HOUSING LOAN

CAR LOAN

WHATEVER LOAN


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Why Compute?

To forecast

To verify

To decide

To plan


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Software to Use

Microsoft Excel

Google Spreadsheet

Open Office Spreadsheet


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Open a blank spreadsheet


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Bring mouse pointer to this border


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✚

Click and drag to widen column


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✚

Type the following under Column A


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Type the following under Column B


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Select the indicated cells


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Click on the Font Color icon


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Click on the Blue color


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Blue reminds you that these are Variables


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Variables?

data that you can manually change anytime in the computation


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Loan Amount

Depends on how much you need AND what the bank is willing to lend


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Annual Interest Rate

Depends on what the bank offers


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Payment Period

Depends on bank policy and your preference


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The following slides are for Microsoft Excel and Open

Office Spreadsheets


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I’ll describe a similar procedure for Google

Spreadsheet later

Select the indicated cells


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Click “Insert” at the Main Menu


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Select “Name” on drop down menu


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Select “Create”


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Check “Left Column”


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Click “OK”


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You’re back here


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What did we just do?

WAIT A MINUTE!


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We created names for the cells


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Cell names make computations easier

to understand


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Cell B2 . . .


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=LOAN_AMOUNT NOTE: SPACES BECOME UNDERSCORES

Cell B3 . . .


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=ANNUAL_INTEREST_RATE NOTE: SPACES BECOME UNDERSCORES

Cell B4 . . .


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=PAYMENT_PERIOD_IN_YEARS NOTE: SPACES BECOME UNDERSCORES


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The following slides are for Google Spreadsheet


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It’s a longer procedure that you can also do in Excel and Open Office

Click on Loan Amount


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Click ‘Edit’


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Click ‘Named ranges’


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Click ‘Define new range’


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Type LOAN_AMOUNT


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Click ‘Save’


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There’s the range name you just defined


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Click ‘Done’


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Click on the interest rate


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Click ‘Edit’


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Click ‘Named ranges’


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Click ‘Define new range’


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Type ‘ANNUAL_INTEREST_RATE’


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Click ‘Save’


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Click ‘Done’


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Click on payment period


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Define new range


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Type PAYMENT_PERIOD_IN_YEARS


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Click ‘Done’


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Now you have your cell range names in

place

Proceed to Cell B5


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Type =PMT(


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See this?


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In Open Office


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In Google Spreadsheet


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It tells us what to put into the formula


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Rate

This is the Interest Rate


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nper

This is the payment period


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pv

This is the loan amount


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[fv] and [type]

Ignore these for now

They are optional Dec 10, 2010 Sid Macatol - How to Create an Amortization Calculator

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Everything makes sense

so far?


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Before moving on…

Remember that we are after MONTHLY AMORTIZATION


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Remember this?


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Therefore #1 . . .

Rate must be in terms of interest rate per month


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Therefore #1 . . .

Rate must be in terms of interest rate per month

Inside the formula, we divide the annual interest rate by 12


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Therefore #2

Payment period must also be in months


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Therefore #2

Payment period must also be in months

Inside the formula, we multiply payment period in years by 12


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Here’s the “rate”


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=PMT(annual_interest_rate/12, payment_period_in_years*12, loan_amount)

Note for Open Office

Just replace commas with semi-colons


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Note for Open Office

Just replace commas with semi-colons

Formula appears like this:


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=PMT(annual_interest_rate/12; payment_period_in_years*12; loan_amount)

Here’s “nper”


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Here’s “pv”


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Here’s how it looks in the spreadsheet


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Let’s zoom in a bit


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In Open Office


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Notice the semi-colon instead of the comma in between variables

In Google Spreadsheet


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You now have your monthly amortization


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Change the payment period to 20 years


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Amortization lowers only slightly


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Stick to 15 years but go for 9% interest


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Monthly amortization is P600 lower!


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Negotiate once, enjoy P600 savings a month for 15 years. Not bad!


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You set this AMORTIZATION CALCULATOR

only once


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You’ve got it for life


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Enjoy the power of knowing your own

numbers

Thanks for watching the slides.

Polite comments are welcome at http://virtualsidekick.blogspot.com

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Dream a life! Live your dreams!

Sid Macatol


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how to create an amortization calculator

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