Mortgage Lending
Practices...
Amortization Table
What is it?
Amortization tables are published
and used throughout
the real estate
industry. They are
tables most often
used to find the
payments needed to
repay a home
mortgage loan.
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The table
below shows the
monthly payments per
$1,000 of loan for
interest rates from
5% to 14% for
periods ranging from
5 to 35 years. When
you use an
amortization table,
notice that there
are five variables:
(1) frequency of
payment, (2)
interest rate, (3)
maturity, (4) amount
of the loan, and (5)
amount of the
periodic payment. If
you know any four of
these, you can
obtain the fifth
variable from the
tables. For example,
suppose that you
want to know the
monthly payment
necessary to
amortize a $60,000
loan over 30 years
at 10½% interest.
The first step is to
locate the 10½%
line. Then locate
the 30 year column.
Where they cross,
you will find the
necessary monthly
payment per $1,000:
$9.15. Next multiply
$9.15 by 60 to get
the monthly payment
for a $60,000 loan:
$549. If the loan is
to $67,500, then
multiply $9.15 by
76.5 to get the
monthly payment:
$617.63.
Suppose the
interest rate is
12%, the maturity is
35 years, and the
amount of the loan
is $100,000. The
table below shows
the monthly payment
per $1,000 to be
$10.16. Multiply
this by 100 for a
$100,000 loan and
you get $1,016 as
the monthly payment.
At 13% interest this
loan would cost
$1,096 per month and
at 14% it would cost
$1,176 per
month.
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AMORTIZATION
TABLE
MONTHLY PAYMENT PER
$1,000 OF LOAN
|
Interest
Rate
|
|
5
years
|
|
10
years
|
|
15
years
|
|
20
years
|
|
25
years
|
|
30
years
|
|
35
years
|
|
5.000%
|
|
$18.88
|
|
$10.61
|
|
$7.91
|
|
$6.60
|
|
$5.85
|
|
$5.37
|
|
$5.05
|
|
5.500%
|
|
$19.11
|
|
$10.86
|
|
$8.18
|
|
$6.88
|
|
$6.15
|
|
$5.68
|
|
$5.38
|
|
6.000%
|
|
$19.34
|
|
$11.11
|
|
$8.44
|
|
$7.17
|
|
$6.45
|
|
$6.00
|
|
$5.71
|
|
6.500%
|
|
$19.57
|
|
$11.36
|
|
$8.72
|
|
$7.46
|
|
$6.76
|
|
$6.32
|
|
$6.05
|
|
7.000%
|
|
$19.81
|
|
$11.62
|
|
$8.99
|
|
$7.76
|
|
$7.07
|
|
$6.66
|
|
$6.39
|
|
7.500%
|
|
$20.04
|
|
$11.88
|
|
$9.28
|
|
$8.06
|
|
$7.39
|
|
$7.00
|
|
$6.75
|
|
8.000%
|
|
$20.28
|
|
$12.14
|
|
$9.56
|
|
$8.37
|
|
$7.72
|
|
$7.34
|
|
$7.11
|
|
8.500%
|
|
$20.52
|
|
$12.40
|
|
$9.85
|
|
$8.68
|
|
$8.06
|
|
$7.69
|
|
$7.47
|
|
9.000%
|
|
$20.76
|
|
$12.67
|
|
$10.15
|
|
$9.00
|
|
$8.40
|
|
$8.05
|
|
$7.84
|
|
9.500%
|
|
$21.01
|
|
$12.94
|
|
$10.45
|
|
$9.33
|
|
$8.74
|
|
$8.41
|
|
$8.22
|
|
10.000%
|
|
$21.25
|
|
$13.22
|
|
$10.75
|
|
$9.66
|
|
$9.09
|
|
$8.78
|
|
$8.60
|
|
10.500%
|
|
$21.50
|
|
$13.50
|
|
$11.06
|
|
$9.99
|
|
$9.45
|
|
$9.15
|
|
$8.99
|
|
11.000%
|
|
$21.75
|
|
$13.78
|
|
$11.37
|
|
$10.33
|
|
$9.81
|
|
$9.53
|
|
$9.37
|
|
11.500%
|
|
$22.00
|
|
$14.06
|
|
$11.69
|
|
$10.67
|
|
$10.17
|
|
$9.91
|
|
$9.77
|
|
12.000%
|
|
$22.25
|
|
$14.35
|
|
$12.01
|
|
$11.02
|
|
$10.54
|
|
$10.29
|
|
$10.16
|
|
12.500%
|
|
$22.50
|
|
$14.64
|
|
$12.33
|
|
$11.37
|
|
$10.91
|
|
$10.68
|
|
$10.56
|
|
13.000%
|
|
$22.76
|
|
$14.94
|
|
$12.66
|
|
$11.72
|
|
$11.28
|
|
$11.07
|
|
$10.96
|
|
13.500%
|
|
$23.01
|
|
$15.23
|
|
$12.99
|
|
$12.08
|
|
$11.66
|
|
$11.46
|
|
$11.36
|
|
14.000%
|
|
$23.27
|
|
$15.53
|
|
$13.32
|
|
$12.44
|
|
$12.04
|
|
$11.85
|
|
$11.76
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Loan
Size
A
amortization table
is most often used
to find the payments
needed to repay a
home loan. However, they
can also be used in
a number of other
ways. Suppose that a
prospective buyer
can afford monthly
principal and
interest payments of
$650 and lenders are
making 30-year loans
at 10½%. How large
of a loan can your
buyer of your
investment property
afford? In the table
above find where the
10½% line and the
30-year column meet.
You will see $9.15
there. This means
that every $9.15 of
monthly payment will
support $1,000 of
loan. To find how
many thousand of
dollars $650 per
month will support,
divide $650 by
$9.15. The answer is
71.038 thousand or
$71,038. By adding
the buyer's down
payment, you know
which investment
property the buyer
can afford to
purchase.
Maturity
With
an amortization
table you can find
the number of years
necessary to repay a
loan when you know
the interest, loan
amount, and the
periodic payment.
For example, if the
amount to be
borrowed is
$200,000, the
interest rate is
11½% and the
monthly payments are
$2,034, how long
will it take to
repay the loan?
Divide $2,034 by 200
to get the rate per
thousand: $10.17.
Then look for $10.17
on the 11½% line.
You will see that it
falls in the 25-year
column. So the
answer is 25 years.
Interest
Rate
An
amortization table
can also help you
find the interest
rate when you know
the length of the
loan, the loan
amount, and the
monthly payment.
Again, the first
thing you do is to
find the monthly
payment per thousand
by dividing the loan
payment by the loan
size in thousands.
Given a 20-year,
$50,000 loan with
monthly payments of
$450, you first
divide $450 by 50 to
get the monthly
payments per
thousand: $9.00. In
the 20 year column,
this is opposite 9%
interest.
As
you have noticed,
everything in the
table above is on a
monthly payment per
thousand basis. With
today's technology
an amortization
table can be
produced in a matter
of seconds, it is
possible to check on
monthly payments for
loans from $100 to
1,000,000 plus, to
determine loan
maturities for each
year from 1 to 40
years, and to
calculate many more
interest rates.
Change
in Maturity Date
An
amortization table
also shows the
impact on the size
of the monthly
payment when the
life of a loan is
extended.
For
example, at 11%, a
10-year loan
requires a monthly
payment of $13.78
per thousand of
loan. Increasing the
life of the loan to
20 years drops the
monthly payment to
$10.33 per $1,000.
Extending the loan
payback to 30 years
reduces the monthly
payment to $9.53 per
thousand. The
smaller monthly
payment is why 30
years is a popular
loan with borrowers.
Going beyond 30
years does not significantly
reduce the monthly
payment, 35 years
reduces the monthly
payment by only 16¢
per thousand but
adds 5 years of
monthly
payments.
At
still higher
interest rates the
reduction is even
less impressive: at
12% interest, a
$100,000 loan for 30
years requires
monthly payments of
$1,029 and at 35
years it is $1,016.
Since the interest
on this loan amounts
to $1,000 per month,
you can see why
there is a limit as
to how far the
monthly payment can
be reduced by
extending its
maturity. Being
practical, amortized
real estate loans
are seldom made for
more than 30 years.
This is also
affected by the life
span of the property
being mortgaged.
Lenders do not like
to lend for longer
than three-quarters
of the remaining
useful life of a
building. This
permits a 30 year
loan on a property
with 40 remaining
useful years and 15
years loan on a
property with only
20 remaining years.
Amortization
Table To Amortized
Loan
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