Loan Amortization

This function allows you to enter the terms for a loan with variable monthly payments and/or interest rates, and display/print amortization schedules for the loan. The function handles balloon payments, negative amortization, final payments, and up to 200 changes in either payment amount or interest rate (or both) during the life of the loan. After you have entered the loan terms, you may review the results for any or all years on the screen without spending the time to print reports. You also may save loan terms on disk for easy recall and adjustment of the loan terms.

You enter loan payment terms as "steps" in the Loan Terms Grid shown at the center of the screen. A step occurs whenever the loan payment or interest rate changes. Thus a standard fixed rate 30 year mortgage at 12% with a $1,000 monthly payment has the single step of:

A more complicated variable loan might have three steps of:

These loan terms have been saved on the shipped diskette under the name WSAMPLE so that you may recall them (with the File/Open menu option) and generate the loan amortization to familiarize yourself with the operation of this function. This is the loan showing on the screen above. Notice that the software has automatically corrected the last step to 218 months/payments, since the balance has been entirely repaid with that payment.

To insert a new step, press c -I (or choose the Edit/Insert menu option) when the cursor is on a step, and a line will open up to insert the new step. Pressing c- (or choose the Edit/Delete menu option) deletes the step where the cursor is currently placed. The Remaining Balance and Date columns are automatically updated for you as you add, change, delete and insert steps. If you enter a step where the payment is sufficient to completely pay off the loan during that step, the software knows that the loan has been paid off, and will not allow entry of additional steps after the remaining balance is reported as zero. You may, however, insert and delete steps before the last step, if you wish.

Payment Calculator You are probably familiar with the concept of "balloon", "amortizing", and "interest-only" payments. When you are entering loan steps and place the cursor in the Payment column, you may press either P (for Payment) or C (for Calculate) to bring up this payment calculator allowing you to compute any of these payment amounts for your loan. Entering 0 (zero) for the months in the calculator will give you the interest-only payment amount. Entering 1 (one) for the months yields the balloon payment, and any other value yields the amortizing payment over the number of periods entered.

"Negative amortization" occurs when the payment amount is not sufficient to pay the interest due. We handle negative amortization by adding the shortfall to the balance due on the loan and counting the unpaid interest as interest. The WSAMPLE loan amortizes negatively for the first two years, so you may look at this loan amortization to see exactly how this situation is treated. Deductibility of unpaid interest is governed by the status of the taxpayer (accrual versus cash basis) and the tax laws in effect, so you should consult your tax counsel in such cases.

Compute When you enter or change any loan step value, the Amortization Grid in the lower portion of the screen will turn gray, indicating that the amortization shown, if any, has not been updated to show your changes. You may, at any time, press the Compute button to recalculate the Amortization Grid for your current loan terms.

Loan View allows you to display either a Monthly or Yearly amortization in the Amortization Grid.