When the loan amount is repaid by parts over a certain amount of time, the loan is called an amortized loan.Ī borrower will typically be interested in knowing how much he will have to pay periodically if he takes up a loan of a certain amount over a certain period of time. At the same time, the lender will expect to receive interests from the borrower as a reward of undertaking the risk to lend out the money. When a lender like a bank extends a loan to a borrower, provisions will be made for the borrower to repay the loan amount some time in the future or in parts periodically. We can visualize the impact with a nice chart (requires some extra work) like this:ĭo check the download workbook for details on how the chart is setup.Microsoft® Windows 7, Windows 8 or Windows 10 Go ahead and play with the table by typing some values in the “Extra payment” column. Step 3: Your mortgage will end when the “Eff.
Extra Payment is the input column where we can type any extra payments.We can get this with the PPMT() function. Principal Paid is the amount of principal paid in each month.=ROUND(NPER($E$7/12,$E$10,$D13),0) will tell us how many months it is rounded. We can use NPER function to get the answer here. Effective term is how long it would take you to pay off the mortgage based on the opening balance, and agreed upon monthly payment (calculated in Step 1) and interest rate (Cell E7).For subsequent months, this will same as previous month’s closing balance.
Opening Balance is same as loan amount for month=1.Related: Read about SEQUENCE and other Dynamic Array functions in Excel. You can use =SEQUENCE(360) to automatically generate all the months. So, set up a range of 360 months (or longer if you want to cater for longer mortgages). In my case, let’s say loan is $500,000, term is 20 years and APR (Interest rate) is 5.35% per annum.Īs extra payment will bring down the outstanding loan term, we need to set up an amortization table to see the impact clearly. Step 1: Calculate the monthly (or weekly / fortnightly) payment:Īssuming you have the Loan amount, term & APR in three cells E5, E6 & E7, we can use the PMT() function to calculate the periodic payment.
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