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Amortization Schedule
 Amortization
Schedule
.

.
 After securing mortgage, the lending institution (bank)
will prepare an amortization schedule.
The amortization schedule is a list for each mortgage
payment, the payment number, the interest payment, the
amount applied toward principal amount, and the resulting or
outstanding balance to be paid.
Procedures for Computing an Amortization Schedule

. Step 1 Find the interest for the first month. Use 𝐼 = 𝑃𝑟𝑡,
1
.

.
where 𝑡 = 12. Enter this value in the amount of interest.
.

.
 Step 2 Subtract the interest from the monthly amortization to
get the amount paid on the principal. Enter this amount in a
column labeled amount of principal.
Step 3 Subtract the amount of payment on the principal
found in step 2 from the mortgage amount to get the balance
of the loan. Enter this in a column labeled as Outstanding
Balance
Step 4 Repeat the steps using the outstanding balance
. found in step 3 for the new principal.
.

.
 Example
Suppose you purchases a house and secures a loan of
Php 1,600,000 pesos for 30 years at an annual interest rate
of 6.5%. Compute the first two months of an amortization for
the loan.
Solution.
The value of mortgage is 1,600,000, the interest rate is
6.5%, and the monthly payment or amortization is 10,113.08.
.
Step 1 Find the interest for the month 1.
.
𝐼 = 𝑃𝑟𝑡
. 1
= 1,600,000 .065
.
.
12
. ≈ Php 8,666.67
 Payment Monthly Amount of Amount of Outstanding
Number Amortization Interest Principal Balance
1 𝟏𝟎, 𝟏𝟏𝟑. 𝟎𝟖 𝟖, 𝟔𝟔𝟔. 𝟔𝟕 𝟏, 𝟒𝟒𝟔. 𝟒𝟏 𝟏, 𝟓𝟗𝟖, 𝟓𝟓𝟑. 𝟓𝟗

Step 2 Subtract the interest from the monthly amortization.

10,113.08 − 8,666.67 = 1,446.41
Step 3 Subtract the amount of principal from the mortgage.
1,600,000 − 1,446.41 = 1,598,553.59
Now we repeat steps 1-3 using the balance 1,598,553.59.
.
Amount of Interest for the second month.
. 1
. 𝐼 = 𝑃𝑟𝑡 = 1,598,553.59 .065
12
.
≈ Php 8,658.83
.

.
 Payment Monthly Amount of Amount of Outstanding
Number Amortization Interest Principal Balance
1 𝟏𝟎, 𝟏𝟏𝟑. 𝟎𝟖 𝟖, 𝟔𝟔𝟔. 𝟔𝟕 𝟏, 𝟒𝟒𝟔. 𝟒𝟏 𝟏, 𝟓𝟗𝟖, 𝟓𝟓𝟑. 𝟓𝟗
2 𝟏𝟎, 𝟏𝟏𝟑. 𝟎𝟖 8,658.83 1,454.25 𝟏, 𝟓𝟗𝟕, 099.34

Payment toward the principal during second month:

10,113.08 − 8,658.83 = 1,454.25
Outstanding balance after second month:
1,598,553.59 − 1,454.25 = 1,597,099.34
.

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 Key Takeaways

➢ A type of payment , often in cash, made

Down payment in the early stages of a purchase of an
expensive good or service.

➢ the amount that is borrowed to buy a

Mortgage Loan real state.

➢ a list for each mortgage payment, the

Amortization payment number, the interest payment, the
.

. Schedule amount applied toward principal amount,

. and the resulting or outstanding balance to
.
be paid.
.