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

Amortization?

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

What Loan?

HOUSING LOAN

CAR LOAN

WHATEVER LOAN

Why Compute?

To forecast

To verify

To decide

To plan

Software to Use

Microsoft Excel

Google Spreadsheet

Open Office Spreadsheet

Open a blank spreadsheet

Bring mouse pointer to this border

Click and drag to widen column

Type the following under Column A

Type the following under Column B

Select the indicated cells

Click on the Font Color icon

Click on the Blue color

Blue reminds you that these are Variables

Variables?

data that you can manually change anytime in the computation

Loan Amount

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

Annual Interest Rate

Depends on what the bank offers

Payment Period

Depends on bank policy and your preference

The following slides are for Microsoft Excel and Open

Office Spreadsheets

I’ll describe a similar procedure for Google

Spreadsheet later

Select the indicated cells

Click “Insert” at the Main Menu

Select “Name” on drop down menu

Select “Create”

Check “Left Column”

Click “OK”

You’re back here

What did we just do?

WAIT A MINUTE!

We created names for the cells

Cell names make computations easier

to understand

Cell B2 . . .

=LOAN_AMOUNT NOTE: SPACES BECOME UNDERSCORES

Cell B3 . . .

=ANNUAL_INTEREST_RATE NOTE: SPACES BECOME UNDERSCORES

Cell B4 . . .

=PAYMENT_PERIOD_IN_YEARS NOTE: SPACES BECOME UNDERSCORES

The following slides are for Google Spreadsheet

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

Click on Loan Amount

Click ‘Edit’

Click ‘Named ranges’

Click ‘Define new range’

Type LOAN_AMOUNT

Click ‘Save’

There’s the range name you just defined

Click ‘Done’

Click on the interest rate

Click ‘Edit’

Click ‘Named ranges’

Click ‘Define new range’

Type ‘ANNUAL_INTEREST_RATE’

Click ‘Save’

Click ‘Done’

Click on payment period

Define new range

Type PAYMENT_PERIOD_IN_YEARS

Click ‘Done’

Now you have your cell range names in

Proceed to Cell B5

Type =PMT(

See this?

In Open Office

In Google Spreadsheet

It tells us what to put into the formula

This is the Interest Rate

This is the payment period

This is the loan amount

[fv] and [type]

Ignore these for now

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

Everything makes sense

so far?

Before moving on…

Remember that we are after MONTHLY AMORTIZATION

Remember this?

Therefore #1 . . .

Rate must be in terms of interest rate per month

Therefore #1 . . .

Rate must be in terms of interest rate per month

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

Therefore #2

Payment period must also be in months

Therefore #2

Payment period must also be in months

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

Here’s the “rate”

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

Note for Open Office

Just replace commas with semi-colons

Note for Open Office

Just replace commas with semi-colons

Formula appears like this:

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

Here’s “nper”

Here’s “pv”

Here’s how it looks in the spreadsheet

Let’s zoom in a bit

In Open Office

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

In Google Spreadsheet

You now have your monthly amortization

Change the payment period to 20 years

Amortization lowers only slightly

Stick to 15 years but go for 9% interest

Monthly amortization is P600 lower!

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

You set this AMORTIZATION CALCULATOR

only once

You’ve got it for life

Enjoy the power of knowing your own

numbers

Thanks for watching the slides.

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

You may follow me at: http://www.google.com/profiles/sid.macatol

Dream a life! Live your dreams!

Sid Macatol

How to Create an Amortization Calculator

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