Hey there all,

I have a $35,750.00 land loan, it is 6.5%/ 5 year with a 15 year amortization.

Started Jun 25 2009, made 2 payments of $311.51 then on Aug 1st/16th began semi-monthly payments of $250 each.

Where can I go to get a picture of future monthly amortization payments and balloon amount after the fifth year?

After spending two hours searching the web to calculate my month by month paydown I have come up blank!

Is there anyone out there who can calculate this for me?

Thanks,

Michael

Michael,

One important factor to know is if your bi-weeklypayments are applied to your account when paid or when they are equal to a full payment.  Many consumers who have signed up with such payment plans lose a large portion of the benefit because the payments are not applied when received.

BankRate offers a bi-weekly calculator here:  http://www.bankrate.com/calculators/mortgages/bi-weekly-mortgage-calculator.aspx

Michael,

Here is an answer I wrote regarding how loan amortization works for most mortgage loans: http://www.mortgagenewsdaily.com/wiki/Understanding_Mortgage_Amortization.asp.

The same principles work in calculating the answer to your problem. From your post it looks like your loan started with a payment due on June 25, 2009 of $311.51. If you make this payment for the next five years you will owe about $27,420 + interest of about $149 on the last payment.

What is confusing is that you are choosing to prepay the loan by paying twice per month or 'semi-monthly.' Presuming that you have the standard terms on your note and you owe 1 payment per month of $311.51/month, paying $250 twice per month is no different than paying $500 once per month. When calculating the amortization of the loan you use a period of 12 payments per year, not 24 payments per year regardless of the amount paid in any one month or when the payment is made. (Unlike simple interest loans.) 

It is likely that your Note has interest charged on the loan at the rate of 6.5% per year payable monthly or 0.541667% per month. If this is the case then on the first payment you made you owed $193.65 in interest on a balance of $35,750.00. You made a payment of $311.51. The difference of the payment of $311.51 and the interest due of $193.65 is the amount of your payment that went to reduce your principal balance. ($311.51 - $193.65 = $117.86) So after the 1st payment your balance was reduced to $35,632.14. ($35,750.00 - $117.86) The next payment of $311.51 included interest due of $193.01 ($35,632.14 X 0.541667%). That left $118.50 paid towards the principal, leaving a balance of $35,513.64. ($35,632.14 - $118.50)

On the third payment (due Aug 25?) you paid $500. $250 on 8/1 and $250 on 8/16. The fact that you paid early is of no consequence. On the third payment you owe $192.37 interest. ($35,513.64 X 0.541667%) You paid a total of $500.00. That leaves $307.63 to be applied to your loan balance, leaving a balance of $35,206.01. ($35,513.64 - 307.63 = $35,206.01)

If you continue to pay $500/month the loan would amortize to zero in about 89 more payments. This can be computed by continuing the calculation above until the balance is reduced to zero. If you use a financial calculator to compute this you would put in the balance of $35,206.01 (PV); the interest rate of 6.5%/yr (i/Y); the payment of -$500.00/month (PMT); and "compute" or solve for the term (N). The answer is 88.91 months.

But your loan has a balloon feature. You must pay the remaining balance on the 60th payment + the interest due for that payment. The balance arrived at above of $32,206.01 was after the third payment. So you have 57 months left to pay on the loan. If you continue the manual calculation above just stop when you arrive at the balance after a total of 59 payments. (2 payments at $311.51/mo and 57 at $500/mo and one final balloon payment paying off whatever the remaining balance is).

If you don't want to do that much arithmetic, you can use a financial calculator to calculate the balance owed after the term is up or you can use a spreadsheet. We determined that after the third payment was made that the balance was $35,206.01; the interest rate is 6.5%; you make payments of $500; and the term is 88.91 payments to get to 0. The balance due after 56 payments is about $15,034. There will also be $81.44 interest due. Therefore the last payment would be about $15,115.

Harlin,

Wow! You're good!  Thank you so much for that answer.  This is wonderful.  I was thrilled that you spent so much of your valuable time to explain exactly what I wanted to know.  Thank you again. 

Two things:

The point Kent brought up was valid.  I believe my loan officer said that the $250 payment @ the middle of the month will be applied at the time it is received and will help reduce the monthly interest balance.  This will have a relatively small effect I suppose, but every little helps. 

Secondly, This financial calculator you mention, is there somewhere I can go to get a month by month print out of the pay-down as this provides me with the ultimate financial incentive.

Have a great weekend,

Regards,

Michael

Michael Mc Cann:

the $250 payment @ the middle of the month will be applied at the time it is received and will help reduce the monthly interest balance. 

If your agreement with the note-holder is the "standard" mortgage note, then this is not accurate. Most mortgages amortize monthly. The mortgage payment is due once per month and interest is calculated on a monthly basis. It is a common misconception that bi-weekly mortgages save the borrower money due to the payment that is made in the first half of the month is applied early and reduces the balance and the amount of interest due.  This is incorrect for most loans.

The reason the borrower saves money is that with bi-weekly mortgages they make more than the minimum required monthly payment twice per year. This extra goes to reduce the balance and shorten the term. For example, if the borrower is paying 1/2 the required payment bi-weekly (every two weeks) then most months the borrower is making 2 payments/month of one half a payment and there is not any difference than just making one whole payment. But twice a year the borrower makes three half payments in the month instead of two half payments. The extra half payment is applied towards the principal balance. Since this happens twice per year the borrower is making an extra payment per year. This reduces the term to about 21 years on a 30 year loan. If a borrower just sends in an extra half payment twice a year with the minimum required monthly payment it accomplishes the exact same thing.

Apparently you are paying $250 twice a month not every two weeks. This is exactly the same as paying $500 once per month.

I uploaded a pdf of a spreadsheet that shows the amortization. You can download it here: http://www.mortgagenewsdaily.com/members/hcooper/files/Spreadsheets/default.aspx

You can get the excel file here: http://www.amortizationer.com/excel-amortization.html

Since you made two payments of the minimum required payment, you amortize those payments to arrive at the balance after those two payments. You take that balance and then amortize it with the $500 payment for the remaining payments. To get the spreadsheet to use a payment of $500/mo adjust the term (number of months) until it shows $500/mo.

Thanks Harlin,

I'm going to have to wait until Tuesday to be able to reconfirm weather or not I have a standard mortgage.  The amortization Schedule is great.

Have a good weekend,

Michael