This code was initially written for PHP-Nuke Titanium.
See how your payments are allocated between interest and principal over time. Total Buyer Ownership Cost.
i. An amortized loan is a loan that requires interest payments to be made periodically. The period is typically one month for a home loan. When an individual makes the monthly payment, part of the payment is interest and part of the payment is a reduction in the loan amount.
ii. Interest is like rent on money
iii. If the borrower agrees to pay an annual interest rate of 12%, the monthly interest rate would be 6%/12 months = .5% per month.
iv. If the current monthly balance of the loan is $250,000, the interest calculation =
\* $250,000\*.5% = $1,250
v. If your monthly payment sent to the banker (the creditor) = $1,348.99, then the two parts are:
\* $1,250 = Interest paid to Banker
\* $1,348.99 - $1,250 = $223.99 left over to reduce your current loan balance
vi. After the banker received your payment of $1,348.99, your current balance for your loan would =
\* $250,000 - $223.99= $224,776.01
i. An amortization table shows what part of a monthly loan payment (PMT) goes into the banker’s pocket as interest and what part is applied to the principal loan amount (Current Balance of Loan) for every payment.