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Amortization Schedule Guide - Financial Calculator Tutorial

Create detailed loan payment schedules

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Generate detailed loan amortization schedules. Calculate monthly payments, interest, principal, and remaining balance for mortgages and loans.

How to Use the Amortization Calculator

  1. Calculate Loan Payment: First use TVM to compute your loan payment (N, I/Y, PV, PMT)
  2. Access Amortization: Press 2ND AMORT to enter the amortization worksheet
  3. Set Starting Period: P1 defaults to 1 (first payment)
  4. Set Ending Period: Enter P2 for the range you want to analyze (e.g., 12 for first year)
  5. View Results: Scroll down to see BAL (balance), PRN (principal), and INT (interest)
  6. Analyze Different Periods: Change P1 and P2 to examine any payment range

Note: The Amortization worksheet uses values from your TVM calculation, so compute PMT first.

Understanding Loan Amortization

The Amortization worksheet breaks down loan payments into principal and interest components for any specified range of payments. It works with values from the TVM worksheet, showing exactly how much of each payment goes toward interest versus principal reduction.

How Amortization Works

With each payment, interest is calculated on the remaining balance. The rest of the payment reduces principal. As the balance decreases over time, less interest accrues, allowing more of each payment to reduce the principal - this is why early payments are mostly interest.

Key Insights from Amortization

  • Front-Loaded Interest: In early years, most of your payment goes to interest (often 80%+ in year 1)
  • Accelerating Principal: Principal reduction speeds up dramatically in later years
  • Total Interest Cost: Over 30 years, total interest can exceed the original loan amount
  • Impact of Extra Payments: Even small additional principal payments save substantial interest

Strategic Uses

Use amortization analysis to:

  • Understand the true cost of borrowing over time
  • Decide between different loan terms (15 vs 30 years)
  • Evaluate the impact of extra payments
  • Plan refinancing decisions
  • Compare different loan offers

Formula & Variables

Interest = Balance × (Rate / Payments per Year)
Principal = Payment - Interest
New Balance = Previous Balance - Principal
  • P1 (Starting Payment): First payment number in the range to analyze (1 = first payment)
  • P2 (Ending Payment): Last payment number in the range (12 = end of first year for monthly payments)
  • BAL (Balance): Remaining loan balance after payment P2
  • PRN (Principal): Total principal paid from P1 to P2 (shown as negative = paid out)
  • INT (Interest): Total interest paid from P1 to P2 (shown as negative = paid out)

Period Selection Examples

  • First year: P1 = 1, P2 = 12
  • Second year: P1 = 13, P2 = 24
  • Year 5: P1 = 49, P2 = 60
  • Last 5 years: P1 = 301, P2 = 360 (for 30-year loan)
  • Single payment: P1 = P2 (e.g., P1 = 100, P2 = 100)

Example Calculations

Mortgage Payment Breakdown

Scenario: $200,000 mortgage at 6% for 30 years. What's the payment breakdown for year 1?

Step Input Display Description
1 2ND P/Y 12 ENTER P/Y= 12.00 Set monthly payments
2 360 N N= 360.00 30 years × 12 months
3 6 I/Y I/Y= 6.00 6% annual rate
4 200000 PV PV= 200,000.00 Loan amount
5 CPT PMT PMT= -1,199.10 Calculate payment
6 2ND AMORT P1= 1.00 Enter amortization
7 ↓ P2= 1.00 Move to P2
8 12 ENTER P2= 12.00 Set ending payment (year 1)
9 ↓ BAL= 197,543.99 Balance after year 1
10 ↓ PRN= -2,456.01 Principal paid year 1
11 ↓ INT= -11,933.19 Interest paid year 1
First Year Results:
  • Total Payments: $14,389.20 (12 × $1,199.10)
  • Principal Paid: $2,456.01 (17.1%)
  • Interest Paid: $11,933.19 (82.9%)
  • Remaining Balance: $197,543.99
  • Loan Reduction: Only 1.23% of original loan!

Key Insight: In year 1, 83% of your payments go to interest! This ratio improves each year as the balance decreases.

Amortization Analysis Tips

  • Compare Years: Run amortization for years 1, 15, and 30 to see how the principal/interest ratio changes
  • Extra Payment Impact: Add extra principal to PMT and recalculate to see interest savings
  • 15 vs 30 Year: Compare total interest by changing N from 360 to 180
  • Refinance Timing: Check when principal payments exceed interest to optimize refinancing

Frequently Asked Questions

Early in the loan, you owe the most money, so interest charges are highest. On a $200,000 loan at 6%, the first month's interest is $1,000 (200,000 × 0.06 ÷ 12). With a payment of $1,199.10, only $199.10 goes to principal. This improves each month as the balance decreases.

For monthly payments, set P1 to (year-1)×12+1 and P2 to year×12. For example: Year 1 is P1=1, P2=12; Year 5 is P1=49, P2=60; Year 10 is P1=109, P2=120. The calculator will show the total principal and interest for that year.

Extra payments reduce your balance faster, saving interest and shortening the loan term. To analyze this, add the extra amount to your regular PMT, recalculate, and run amortization. The difference in total interest shows your savings.

The calculator uses cash flow conventions where negative values represent money paid out (outflows) and positive values represent money received (inflows). Since you're paying principal and interest, they appear as negative values.

Our amortization calculations match those used by financial institutions to the penny. Any minor differences with your actual loan may be due to payment timing, rounding methods, or fees not included in the basic calculation.

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Disclaimer

This Financial Calculator is an independent, third-party tool provided by ryanoconnellfinance.com. It is not affiliated with, endorsed by, or connected in any way to Texas Instruments Incorporated or any of its products. All trademarks, including "BA II Plus," are the property of their respective owners. This tool is provided for educational and informational purposes only and should not be used for official examinations where specific hardware calculators are required. The accuracy of calculations is not guaranteed; verify all results.

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