Amortization Calculator – Bret's Blog (2024)

FAQs

What is the easiest way to calculate amortization? ›

To calculate amortization, first multiply your principal balance by your interest rate. Next, divide that by 12 months to know your interest fee for your current month. Finally, subtract that interest fee from your total monthly payment. What remains is how much will go toward principal for that month.

Starting in month one, take the total amount of the loan and multiply it by the interest rate on the loan. Then for a loan with monthly repayments, divide the result by 12 to get your monthly interest. Subtract the interest from the total monthly payment, and the remaining amount is what goes toward principal.

Mortgage amortization simply refers to the process of paying off your home loan in regular monthly payments over a fixed period of time. So if you get a mortgage with a 15-year term, it means the total cost of the loan will be spread out over 15 years.

There are several ways to calculate the amortization of intangibles. The most common way to do so is by using the straight line method, which involves expensing the asset over a period of time.

What is the Rule of 72? Here's how it works: Divide 72 by your expected annual interest rate (as a percentage, not a decimal). The answer is roughly the number of years it will take for your money to double. For example, if your investment earns 4 percent a year, it would take about 72 / 4 = 18 years to double.

You can use the equation: I=P*r*t, where I=Interest, P=principal, r=rate, and t=time.

Alternatively, we can use Excel's IPMT function, which has the following syntax: =IPMT(rate, per, nper, pv, [fv], [type]). Again, we are focused on the required arguments: Rate: The interest rate of the loan. Per: This is the period for which we want to find the interest and must be in the range from 1 to nper.

Amortization represents the life of your mortgage and an estimation of your total borrowing costs. The standard amortization period lasts 25 years, but you may find 35- or even 40-year options with certain lenders. A longer amortization period can mean lower monthly payments but more interest paid over time.

What is an example of amortization? ›

Example A: A business has a $10,000 software license, which it expects will come to an end in five years. Using the straight-line method, the amortization expense would be $2,000 per year for the next five years. At the end of five years, the carrying amount of the asset will be zero.

If you want to accelerate the payoff process, you can make biweekly mortgage payments or put extra sums toward principal reduction each month or whenever you like. This tactic can help you save on interest and potentially pay your loan offer sooner.

The Rule of 78 formula is simple. Just multiply the amount of new revenue you expect to bring in each month by 78 to get your yearly sales forecast. A caveat to the Rule of 78 formula is that it assumes you'll gain just one new customer per month – and that every customer is paying the same monthly fee.

Beginning balance: This is the principal balance you have at the beginning of each new month before you make a loan payment. Scheduled payment: This is your monthly loan payment. This number will be the same every month. Principal: This is the amount paid toward your principal with every payment.

There are generally three methods for performing amortized analysis: the aggregate method, the accounting method, and the potential method. All of these give correct answers; the choice of which to use depends on which is most convenient for a particular situation.

Formula for calculating simple interest

You can calculate your total interest by using this formula: Principal loan amount x Interest rate x Loan term in years = Interest.