Creating a Loan Amortization Table

A loan amortization table is a table that shows your mortgage payments and interest payments on your mortgage loan. This table shows how your loan is paid off and lets you easily see how your loan is being paid down throughout the life of the loan. Creating a loan amortization table is not too difficult if you understand more about the process of how everything within a mortgage is computed.

Defining the Figures

To create a loan amortization table you have to start with some basic figures. These are:

Principal – total amount of the mortgage
Annual Interest Rate
Length of the loan – in years

Figuring Interest

A conventional loan will have interest compounded monthly. To figure the monthly interest based upon the annual interest rate you would figure it like this:

12 x 100 = Number
Interest / Number = monthly interest

Figuring the Term

You will also need to figure out the total length of the loan in months. To do this:

Length of loan x 12 = loan term in months

Figuring the Monthly Payment

To figure the monthly payment you will need to do a number of calculations. They are as follows:

Add 1 to the monthly interest rate and take it to the negative power and subtract from 1
Take the inverse of the number you have and multiply by the monthly interest rate
Now multiply the number you have by the term in months

Creating the Table

Figuring one month is just the beginning of creating a loan amortization table. You need many further calculations to create a table. The easiest method to figure your own loan amortization table is to use a spreadsheet program. Most computers will have such a program and most programs have built in loan calculators. You may need to use a wizard or special program feature to plug in your mortgage terms. Trying to do all the complicated math may become time consuming and is not necessary when you can easily create a spreadsheet instead.

The point in showing you how to figure a monthly payment is to just give you an idea of the process. Many people get confused about how interest is figured. It may seem simply enough to just multiply a few figures and get you answer, but that is not how it works. Creating a loan amortization table is anything but simple.

It involves plenty of mathematical equations. Some knowledge of how interest rates work can be helpful. However, you do not have to be a math genius to figure out your mortgage loan. There are spreadsheets and even online programs that you can use to easily get an overview of your mortgage.

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Loan Amortization Table

mortgage loan amortization table

Creating a Loan Amortization Table

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