root. Business Templates. March 22nd , 2020.
An amortization schedule is a list of payments for a mortgage or loan, which shows how each payment is applied to both the principal amount and the interest. The schedule shows the remaining balance still owed after each payment is made, so you know how much you have left to pay. To create an amortization schedule using Excel, you can use our free amortization calculator which is able to handle the type of rounding required of an official payment schedule. You can use the free loan amortization schedule for mortgages, auto loans, consumer loans, and business loans. If you are a small private lender, you can download the commercial version and use it to create a repayment schedule to give to the borrower.
Usually, the interest rate that you enter into an amortization calculator is the nominal annual rate. However, when creating an amortization schedule, it is the interest rate per period that you use in the calculations, labeled rate per period in the above spreadsheet.
Basic amortization calculators usually assume that the payment frequency matches the compounding period. In that case, the rate per period is simply the nominal annual interest rate divided by the number of periods per year. When the compound period and payment period are different (as in Canadian mortgages), a more general formula is needed (see my amortization calculation article).
Some loans in the UK use an annual interest accrual period (annual compounding) where a monthly payment is calculated by dividing the annual payment by 12. The interest portion of the payment is recalculated only at the start of each year. The way to simulate this using our Amortization Schedule is by setting both the compound period and the payment frequency to annual.
There are two scenarios in which you could end up with negative amortization in this spreadsheet (interest being added to the balance). The first is if your payment isn't enough to cover the interest. The second is if you choose a compound period that is shorter than the payment period (for example, choosing a weekly compound period but making payments monthly).
A loan payment schedule usually shows all payments and interest rounded to the nearest cent. That is because the schedule is meant to show you the actual payments. Amortization calculations are much easier if you don't round. Many loan and amortization calculators, especially those used for academic or illustrative purposes, do not do any rounding. This spreadsheet rounds the monthly payment and the interest payment to the nearest cent, but it also includes an option to turn off the rounding (so that you can quickly compare the calculations to other calculators).
When an amortization schedule includes rounding, the last payment usually has to be changed to make up the difference and bring the balance to zero. This might be done by changing the Payment Amount or by changing the Interest Amount. Changing the Payment Amount makes more sense to me, and is the approach I use in my spreadsheets. So, depending on how your lender decides to handle the rounding, you may see slight differences between this spreadsheet, your specific payment schedule, or an online loan amortization calculator.
With this template, it is really quite simple to handle arbitrary extra payments (prepayments or additional payments on the principal). You simply add the extra payment to the amount of principal that is paid that period. For fixed-rate loans, this reduces the balance and the overall interest, and can help you pay off your loan early. But, the normal payment remains the same (except for the last payment required to bring the balance to zero - see below).
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