How to Create an Amortization Calculator

1

How to Create an
Amortization
Calculator
Sid Macatol

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

2

Amortization?

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


3

What Loan?
 OUSING LOAN
H
 AR LOAN
C
 HATEVER LOAN
W


4

Why Compute?
 o forecast
T
 o verify
T
 o decide
T
 o plan
T


5

Software to Use
 icrosoft Excel
M
 oogle Spreadsheet
G
 pen Office Spreadsheet
O


6

Open a blank spreadsheet


Bring mouse pointer to this 7

border

✚


Click and drag to widen 8

column
✚


Type the following under 9

Column A


Type the following under 10

Column B


11

Select the indicated cells


12

Click on the Font Color icon


13

Click on the Blue color


Blue reminds you that these 14

are Variables


15

Variables?

 data that you can
manually change
anytime in the
computation


16

Loan Amount

 epends on how much you need AND
D
what the bank is willing to lend

17

Annual Interest Rate

 epends on what the bank offers
D


18

Payment Period

 epends on bank policy and your
D
preference

19

The following slides
are for Microsoft
Excel and Open
Office Spreadsheets


20

I’ll describe a similar
procedure for Google
Spreadsheet later


21

Select the indicated cells


Click “Insert” at the Main 22

Menu


Select “Name” on drop down 23

menu


24

Select “Create”


25

Check “Left Column”


26

Click “OK”


27

You’re back here


28

WAIT A MINUTE!

What did we
just do?

29

We created names
for the cells


30

Cell names make
computations easier
to understand


31

Cell B2 . . .

=LOAN_AMOUNT
NOTE: SPACES BECOME UNDERSCORES


32

Cell B3 . . .

=ANNUAL_INTEREST_RATE


33

Cell B4 . . .

=PAYMENT_PERIOD_IN_YEARS


34

The following slides
are for Google
Spreadsheet


35

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


36

Click on Loan Amount


37

Click ‘Edit’


38

Click ‘Named ranges’


39

Click ‘Define new range’


40

Type LOAN_AMOUNT


41

Click ‘Save’


There’s the range name you 42

just defined


43

Click ‘Done’


44

Click on the interest rate


45

Click ‘Edit’


46

Click ‘Named ranges’


47

Click ‘Define new range’


Type 48

‘ANNUAL_INTEREST_RATE’


49

Click ‘Save’


50

Click ‘Done’


51

Click on payment period


52

Define new range


Type 53

PAYMENT_PERIOD_IN_YEARS


54

Click ‘Done’


55

Now you have your
cell range names in
place


56

Proceed to Cell B5


57

Type =PMT(


58

See this?


59

In Open Office


60

In Google Spreadsheet


It tells us what to put into the 61

formula


62

Rate

 his is the Interest Rate
T


63

nper

 his is the payment period
T


64

pv

 his is the loan amount
T

65

[fv] and [type]

 gnore these for now
I
 hey are optional
T

66

Everything
makes sense
so far?


67

Before moving on…
 emember that we are after
R
MONTHLY AMORTIZATION


68

Remember this?


69

Therefore #1 . . .
 ate must be in terms of interest rate
R
per month


70

Therefore #1 . . .
 ate must be in terms of interest rate
R
per month
 nside the formula, we divide the
I
annual interest rate by 12


71

Therefore #2
 ayment period must also be in
P
months


72

Therefore #2
 ayment period must also be in
P
months
 nside the formula, we multiply
I
payment period in years by 12


73

Here’s the “rate”

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

74

Note for Open Office
 ust replace commas with semi-colons
J


75

Note for Open Office
 ust replace commas with semi-colons
J
 ormula appears like this:
F

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


76

Here’s “nper”

loan_amount)

77

Here’s “pv”

loan_amount)

Here’s how it looks in the 78

spreadsheet


79

Let’s zoom in a bit


80

In Open Office

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

81

In Google Spreadsheet


You now have your monthly 82

amortization


Change the payment period 83

to 20 years


Amortization lowers only 84

slightly


Stick to 15 years but go for 85

9% interest


Monthly amortization is P600 86

lower!

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


87

You set this
AMORTIZATION
CALCULATOR
only once


88

You’ve got it
for life


89

Enjoy the power of
knowing your own
numbers


90
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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How to Create an Amortization Calculator