General Usage Instructions
Enter your details and as each input is changed your result will automatically calculate. By default the calculator presumes you want a mortgage loan. If you are amortizing a different loan schedule then be sure to set the PMI, property tax, and closing costs to zero.
Usage Instructions For Home Mortgages
If you are entering a real estate loan be sure to enter the property value as if the loan is below 80% loan-to-value then PMI will be set to zero & if you do have a higher LTV then the property value will be used to determine how long you must pay PMI for. For real estate loans the property tax field is an annual dollar amount while the closing costs input is set to percent. For the sake of the calculation the closing cost is presumed to be paid upfront instead of rolled into the loan. A schedule of your monthly payments will display below the calculator along with the option to print your results.
The Amortization Equation
In the above equation, here is what the variables stand for:
- A = periodic payment
- P = amount of principal remaining after the initial downpayment
- i = periodic interest rate
- n = number of payments
Loan Amortization Versus Asset Appreciation / Depreciation
Real Estate
Outside of temporary pricing bubbles, homes typically appreciate at a rate which is fairly similar to the general rate of inflation. They can be a good purchase if you know you are going to live in the house for an extended period of time, have great job stability & have other assets, but those seeking investment returns & employment flexibility would typically be better off investing in the stock market or other asset classes which are far more liquid & do not have significant maintanece costs. While property taxes and mortgage interest can be decducted from income taxes in some countries, it is also worth nothing that properties need to be maintained and are much harder to sell quickly than a stock or bond.
Automotive
Automobiles typically lose roughly 10% of their value the moment you drive them off the lot. On average they lose another 10% in the fist year, about 12% more the second year, 11% the third, 9% the fourth & 9% the fifth year. Due to rapid depreciation, many automobile loans will end up upside down unless the buyer trades in their own car or has a significant down payment. Various vehicle makes & models hold value at different rates, but here is an example depreciation table.
| Age | Value | Depreciation | % of New Price |
| Brand New | $30,000 | 0% / $0 | 100% |
| Driven Off Lot | $26,700 | 11% / $3,300 | 89% |
| 1 year | $23,700 | 21% / $6,300 | 79% |
| 2 years | $20,700 | 31% / $9,300 | 69% |
| 3 years | $17,700 | 41% / $12,300 | 59% |
| 4 years | $14,400 | 52% / $15,600 | 48% |
| 5 years | $11,100 | 63% / $18,900 | 37% |
A Primer on Personal Finance
Loans are simple, right?
You borrow money when you need it, and you pay it back when you have it. Once you've paid back the loan with interest, your credit is A1 and you can then borrow more money anytime you want.
Not so fast, big spender. Financial management is tricky business, and if you're not careful you'll end up in a corner with no place to go.
The biggest mistake borrowers make is biting off more than they can chew. There are several ways a person can over-extend themselves, and a million ways to avoid these financial pitfalls.
Keep Track Of Your Credit History
Staying on top your credit history by checking your report and score regularly is the first defense against defaulting.
For a lender, the ideal customer is a borrower who not only has the means to pay back the loan, but also has the documentation to prove it. Don't even think about applying for financing without the paperwork to back up your figures, such as pay stubs, W-2 forms, and other proof of income or net worth.
Use Smart Money Management
When repaying a loan, consider how those payments affect the rest of your budget, and whether the interest is eating you alive. You can try to refinance at a lower interest rate, or you can consolidate to juggle your finances, but you can't just blindly take on more debt to keep you afloat.
You need to manage your debts and repayment schedule in a mature and responsible way, rather than the haphazard way that got you into debt. If handled incorrectly, missed loan payments can both add additional fees and increase your interest rates - leading to a spiral of faster debt accumulation.
What Is a Debt Obligation?
There are many different loans that individuals have to repay, including personal, car , student, and home loans. The common denominator is they all must be repaid, or each one will be affected.
Defaulting on one loan could very well cause a chain-reaction that will cause your finances to collapse like a house of cards. However, the question remains: which one should you pay off first?
Which Debts Should You Pay Off First?
The advice offered by conventional wisdom (and all your in-laws) is to pay off the highest interest debt first because that is the most costly. That's true, but it's also an oversimplification.
You should instead ask yourself, "Paying off which debt first will give me the biggest bang for my buck, in terms of lowering my obligations while also raising my credit score?" If you can kill two birds with one stone...why not?
Bear in my mind that there are two types of debt, installment and revolving.
Installment
We all know what the installment plan means. It's when you pay a set amount every month for a product or service you've already received, such as a car, a house, or an RV. Normally, an asset secures the debt.
Your car loan is an installment loan, as are mortgages, home equity, student and personal loans. These types of loans are low risk for the lender because they are collateralized; if you miss a few payments they'll just repossess your car or RV and sell it off.
Revolving
Revolving debt can be repaid in part or in full each month instead of fixed-amount installments - your credit cards, for example, and home equity lines of credit (HELOCs).
For lenders, a close look at your revolving debt history is a good indication of your risk potential. Firstly because it's unsecured, and not based on collateral, you won't physically lose anything if you default on your credit cards; and secondly, credit card interest (about 15 percent) is generally much higher than mortgages, student, or auto loans (about 5 percent).
Pay Off Your Credit Cards First
For all the reasons above, paying off your credit cards quickly is imperative to a healthy credit score. Consume with cash, not plastic.
Credit card debt is bad news for your credit score, but the good news is that paying it down at an accelerated pace will improve your score.
So if you had to choose between paying off your car, or paying off your credit cards, the clear choice would be your credit cards.
Some cards offer zero interest balance transfers which may save money, but make sure to read the small print to see how, if, where, and when charges begin.
If you use a balance transfer option make sure you do not place a revolving balance on the old card again.
Make Extra Payments When You Can
The faster you repay a loan, the less you'll end up paying in interest charges, but don't devote too much of your disposable income to additional payments or you'll find yourself with little or no money to enjoy your life.
The intelligent method is to pay the minimum required payment on each of your obligations, except for the one you want to get rid of first. Don't try to make extra payments on more than one loan at a time because life is already too complicated.
Don't Hesitate To Consolidate
If you want to make your life a little less complicated, consider debt consolidation, where multiple sources of debt - mortgages, auto loans, insurance, utilities and personal loans - are combined into a single monthly payment which is more manageable.
The added benefit of consolidation t is the psychological advantage of knowing that your debt is going down slowly but surely. Before consolidating, consumers often feel that by making the minimum payments, the principal will never be paid off completely, and they may be right.
Leave Yourself A Safety Buffer
As mentioned, you should never sacrifice your quality of life for the sake of fulfilling your obligations, unless you have to. You may have to live like a student in order to pay off your student loan, but you should never put yourself in a position of paying off your debts so conscientiously that you're flat broke at the end of every month.
Remember, if you devote the recommended one quarter of your income to pay for housing, and one quarter for vehicle-related costs, and one quarter for food and entertainment, you can use up to half of what's left to repay loans and pay down debts.
If you aren't able to set aside at least 10 percent of your income for unexpected expenses and emergencies, you're cutting it too close.
Making debt reduction a priority in your life is a noble endeavor, but it has to be part of a balanced budget in which you live within your means.