Amortization & Prepayment Help

1. Sliders - move the sliders to set the values of loan principal, interest rate, loan length, and mortgage start date.


2. Data display - use the buttons to choose how you want the output to be displayed.


3. Settings- Adjust the displays or outputs of the calculator


4. Initial Loan Data- Input loan data as opposed to using the sliders
   
5. Prepayment Data- See how monthly or lump sum prepayments against the loan will change the total interest and shorten the final pay-off.


6. Print the Results-Print your final results

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Using the sliders: The various graphs, charts and tables will re-calculate and display after moving and releasing the left mouse button. The slider value inputs:

• Loan Amount: The beginning or original loan amount


• Term: The number of years the loan will be amortized


• Start Date: The first monthly payment of the loan. For example if a loan is closed on September 25th the first month of amortization will be October 1st and the first payment will be November 1st since principal and interest is paid in arrears. The start date will be November.


• Start Year: The year in which the first payment is made.


• Interest Rate: The interest on the loan. There are four sliders to set the rate: the first slider sets the whole number and the next three sliders set the decimal place i.e. 7.875% would be set as 7 on the first slider, 8 on the second slider, 7 on the third slider and 5 on the fourth slider. (The slider may be reset in one-eighth increments by using the settings drop down menu.)

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Data Displays: click on the display you wish to view:

• Amortization Graph: The graph breaks down the total payment into principal and interest payments made each year. Note how the curves show increased principal and decreased interest being paid as time goes by. Also note that extra payments "push" up the principal curve, i.e. the annual principal amount shown is increased by the value of the extra payment. See also the Settings Menu option for this graph.


• Repayment Chart: A pie chart that will break down the percentage of the total payments made over the entire mortgage (or the breakdown of the average monthly payment).


• Balance Graph: Shows the balance outstanding over the term of the mortgage. It is useful when extra payments are made to visually see how much sooner the mortgage is paid-off, and how quickly the balance drops.


• Annual Table: Amount of principal and interest paid each year of the loan.


• Monthly Table: A break down of the principal and interest paid month of the loan.


• Summary: Shows a summary of the current values.

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Settings: The charts and sliders may be adjusted for your preferences:

• Principal Amount: The default setting is $500,000; use the drop down menu for larger loan amounts


• Interest Sliders: You can use either 1/8th increments or decimal places.


• Static vs Dynamic: In the dynamic mode the charts will change as the sliders move; in the static mode the results are displayed after the changes are made (mouse button released).


• Amortization: The system used for calculating American monthly mortgage payments is the same or very similar to many other countries around the world. Canadian financial institutions use a slightly different formula.


• Amortization Graph: Normal mode works as described in the amortization graph section above. Stacked mode shows principal, interest and extra payments all stacked on top of each other. Unlike normal mode, there is no overlap between data.


• Monthly/Bi-weekly payments: Limited support for bi-weekly mortgages are present through this option. When bi-weekly payments are selected, an extra half-monthly payment is made every six months. This equates to making 13 monthly payments every 12 months - a close approximation of how a typical bi-weekly mortgage will work.

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Initial Loan Data If you don't like using the sliders, you can enter data directly in this section.

• Principal: The loan amount's balance (note after you have input a balance the sliders at the top will adjust to this value).


• Interest %: The interest rate on the loan expressed as a percentage.


• Annual Insurance & Taxes: Values for the Tax and Insurance fields are simply divided by 12 and included in the monthly payment amount.

Important: When entering values into the "Inital Loan Data" & "Prepayment Data" areas make sure to press "enter" after you enter the last value. Using the TAB key will work on some browsers, and clicking the mouse over the next box is fine too, just make sure the last value you enter has been recognized by the calculator, and is being taken into account when calculations are made.

If you are unable to even enter data in the prepayment fields, there is a good chance that the problem is with your browser. Try upgrading to the latest version, or try the applet on a different machine with a different browser.

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Prepayment Data: This section gives you the opportunity to estimate how you can shorten the term of your mortgage by making either a single one-off payment or continuous extra monthly payments. On the right-hand side, the Savings field shows you how much money you will save, while the Real Savings field once again uses the inflation rate to give a rough estimate of what these savings are in real terms given that the interest savings are spread over a number of years.

• Monthly Prepayment: The extra monthly amount to be paid to reduce the loan balance.


• Starting After Month #: The first month the extra monthly payments will be made i.e. if the loan has been outstanding for 3 years and next month you want to begin paying $100 extra; the starting month would be 37.


• One Time Prepayment: A lump sum payment toward the loan balance


• After month #: The month of the loan the lump sum payment will be made.


• Annual Inflation %: The estimated annual inflation rate over the term of the loan. Applied to the Total Savings to estimate the Real Savings on a inflation adjusted basis.

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Print Report: After adjusting the loan variables throughout the calculator you can print the results, be sure to set the amortization preference as either annual or monthly.