- Personal Finance»
- Mortgages & Loans
Build a Mortgage Excel Calculator or Loan Excel Calculator
Build a Mortgage Excel Calculator
Following on from my hub about UK mortgages, I thought I’d put together another short article about how you can create a Mortgage Excel Calculator to help work out what your payments would be, and how you know how much interest you’re paying each day, month, etc. I’ve put these together as a guide, and should only be used as such, they may not be correct to the penny as banks and building societies have differing formulae for calculating payments.
So to begin creating our Mortgage Excel Calculator we’ll start with the big one, repayments. How do we work out how much the monthly repayment will be on a mortgage or a loan? Well, very handily, Excel comes with a nice little formula to work it out for us. This formula can be used on both mortgages, and other loans. Let us begin though, by adding some basic information into our spreadsheet:
1. In cell B1, enter the number of years you wish to take out the loan over
2. In cell B2, enter the estimated interest rate of the loan
3. In cell B3, enter the amount of the loan
It may be useful for you to add in descriptions in column A so you remember what each of these values mean. Your sheet should now look something like Figure 1.
Then, in another cell of your sheet, add the following formula:
=ABS(PMT(B2/12, B1*12, B3))
This will then give you your estimated monthly payment, as shown in Figure 2.
For those who are interested, the formula breaks down as follows:
PMT(monthly interest rate, no. of months of the loan, loan amount)
This formula produces a negative value and so the ‘ABS’ formula is used to make it positive.
You can change the figures in B1, B2, and B3 at any time and it will recalculate the amount for you. Use this as a guide to working out what interest rates, amounts, and what length of term you can afford.
This formula is very easy to use and should give you an accurate result. What we’re trying to show, is the amount of interest that you are paying on your loan on a daily basis. You could then of course multiply this by 30 or 31 to get a rough idea of your monthly interest, but remember the amount of interest will change depending on when you make payments off the loan, and will of course increase slightly every day that you don’t make a payment as the outstanding amount will be larger (as yesterdays interest will have been added).
Using the same sheet as above, add in the following formula into a blank cell:
What we’re doing here is determining the daily interest rate by dividing the annualised rate by 365 days. We then multiply this by the outstanding loan amount and you can see how much interest is added to your account daily. You can see the example in Figure 3.
It can be quite scary seeing how much interest you are attracting on a daily basis, particularly early on in your loan repayment period. Its also quite nice to see it gradually coming down over the term of the loan!
Calculating Repayment Progress
I include this one as a “rough guide” as it’s exactly that, a rough guide to the progress of your loan, I use it quite often and find it useful. This allows you to see an estimated figure of the value of your loan each year which just gives you an idea of the amount it is reducing each year. In this example I’ve used the same sheet as before. In cell A8 I’ve entered the current date, and in B8 I’ve added the total loan amount. Below this I’ve added the following formula:
This gives you the value of the loan in one years time. Simply copy this formula down the rows and this will show you the progress of the loan each year until the end of the term. As I said above this is only a rough guide, as your repayments throughout the year will reduce the interest payable and so the amount outstanding each year will be slightly less than the amount calculated. As you can see in Figure 4, in the example we have a 5 year loan, and at the end of 5 years there is a small remaining balance. The actual balance would be zero.
If of course you want a more accurate figure you can do this calculation by month instead of by year, but that may give you a lot of values if you do this for your mortgage. E.g. 25 years x 12 = 300 lines. If you do want to look at it monthly, use this formula and copy down as before:
As you can see in Figure 5 this gives a more accurate result and the closing balance is exactly zero.
Taking this one step further you could use the following formula:
If you use this, you could enter a value in column C at any point during the loan, and this will deduct the value at that date from the calculation. This is a simple way of showing the effects of any overpayments you plan on making. Using the example in Figure 6 you can see by making 2 overpayments of £200 on our example loan we can pay off the loan 2 months earlier.
I hope these formulas are of some use to you, if nothing else than to help you with some rough budget planning. I like to keep track of all my outstanding loans like this so I can see how much I owe out at any one time and to see what effect overpayments can have.Why not try building your own Mortgage Excel Calculator, if you have any problems with the formulas, enter a comment below and I’ll do my best to help! Happy budgeting!