Amortization Schedule and Calculations

14 Replies

Hello All!

I'm in the process of buying my first piece of real estate, and I'm aware that an amortization schedule/ calculator helps me find out how many years I can shorten my mortgage by making extra payments on the principal. I've been toying around with some online calculators and I've run into an issue so I'm hoping someone can help me out.

Scenario:

Enter Loan Amount, Interest Rate, and Quantity of Payments. (Brings monthly payment to $402.) I am planning on paying an extra $200.00 to the principal each month for 12 months. This shortens my mortgage from 30 years to a little over 15.3 years.

During this first year, I plan on making improvements + investments + other business ventures and I believe I will be able to pay $300 or $400 extra per month on year 2. However, I cannot find a calculator that allows me to enter $200 worth of extra payments for the first 12 months and then $300 worth of extra payments for the next 12 months. Any suggestions, tips, or links would be greatly appreciated!

I know this is not what you are asking, but have you considered the benefits of NOT paying off your mortgage? 

I understand the concept, but I think your numbers are off. I don’t believe $2400 would eliminate 14.7 years. If so, that would mean your loan amortization schedule would have only $2400 in Princ pmt.s over the first 14.7 years.

try this one

https://www.vertex42.com/Calculators/home-mortgage-calculator.html


@Soh Tanaka No, I have not! I had no idea that was even an option. Care to explain?

Updated 5 months ago

Everyone that I've spoken to about investing has always buried in my head that I need to get to a cash only basis as soon as possible and to not have debts. I don't agree with paying with everything with cash- even when I get to the point to where I could. So I've always had the mindset to pay with credit but pay it off as fast as possible.

@Wayne Brooks Thanks for the input but the calculator only has 3 fill-ins, which I transferred straight from my loan. Maybe you're not realizing that each month I'll be paying $402 (going to principal +interest) + $200 (strictly to principal.) 

You should play around with a calculator! You'd be very shocked by how quickly you can pay off something with just an extra $50-$100 per month. (Or even with a 13th payment before the year ends.)

Yes Kayla I am very familiar with amortization schedules....it’s just that you won’t eliminate 14 years with $2400.
The reason you eliminate years is because when you make extra principle pmts you “skip ahead” in the amortization schedule.

Look at the schedule and see how much principle your normal payments would pay over the next 12 months. If you cut a check today for that amount, you eliminate one year of payments......the last year of your loan.

I’m guessing, without using an amortization calculator, that $200 extra per month is for the Entire loan period, 15.3 years, not just for 12 months

I just checked.....assuming your loan is around $85000 at 4%, your scheduled principle payments for year 1 are about $1400......so on day 1 if you cut a check for $1400 you eliminate 1 year. Each year this amount would rise. Just don’t want you to be misinformed.

@Wayne Brooks Okay.... I'm extremely confused. Please feel free to shoot me a direct message so that I can better understand it.

Kayla - you can do what you want with any of the online calculators:

- Open two windows and bring up the calculator in both

- In the first, put in the initial amount, interest, term and the amount you will be paying initially

- In the second window, put in the remaining owed after 12 months (see window #1) and your new payment. Ignore everything in window 1 after 12 months

- Repeat as needed

However, if you have a fixed rate loan at a good interest rate, I suspect that the money you are using for those "extra payments" might well be better spent on another property. Remember that (generally) while the bank can not call your loan early or increase the interest rate, they NEVER want to give you back money you paid them.  Something to think about.

Originally posted by @Mike Wayne :

Kayla - you can do what you want with any of the online calculators:

- Open two windows and bring up the calculator in both

- In the first, put in the initial amount, interest, term and the amount you will be paying initially

- In the second window, put in the remaining owed after 12 months (see window #1) and your new payment. Ignore everything in window 1 after 12 months

- Repeat as needed

However, if you have a fixed rate loan at a good interest rate, I suspect that the money you are using for those "extra payments" might well be better spent on another property. Remember that (generally) while the bank can not call your loan early or increase the interest rate, they NEVER want to give you back money you paid them.  Something to think about.

Thank you, thank you! It seems a lot of people are advising to hold on to the loan. Going to look more into this.

Build it on excel is the best bet... you can adjust it for use in the future

@Kayla C. - There are a lot of articles, posts, books, articles and podcasts that talk about the benefits of keeping the mortgage. Here's one. 

http://www.getricheducation.com/project/163-home-e...

Basically, done right, instead of parking your money as an equity (paying off your mortgage), use that money to buy more houses, and you'll be financially ahead. 

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Join the Largest Real Estate Investing Community

Basic membership is free, forever.