The Loan Repayment Grid will help you to quckly calculate your monthly repayment on a home loan and determine how you can pay off your loan in a shorter period of time.

Note on entering values
Use the backspace key to delete an existing value before entering a new value
Use only numbers and the decimal point (Do not use commas or spaces in numeric fields)

Steps

1. Enter the Loan amount, Rate and Years fields in the top grid.
2. Click on Calculate Payment button to populate the monthly repayment amount based on the first three values you entered.
3. Click the Expand button to populate the bottom grid with a monthly breakdown of your remaining balance, how much interest you're paying that month and how much you're actually paying off on the loan (capital payment).
4. **Consider various extra payments and how it will effect your loan repayment

Loan amount
This is the total amount of the loan (principal value) that you have to repay.

Rate
The interest rate of your loan as determined by your bank.

Years
The number of years you have to repay the loan.

Extra Payments **
Once you have completed steps 1,2 & 3 above, you will see a monthly breakdown of your loan over the period (years) specified. The breakdown shows you how much interest you're paying that month, how much you're actually paying off on the loan (the Capital column) and the balance of your loan (how much you still owe the bank) for that month.

I'll use an example to explain the extra payments option. Let's say you're taking a loan of $100,000 over a 20 year period and the interest rate is 10%.

Enter 100,000 into the Loan Amount field, 10 into the Rate field and 20 into the Years field. Click the Calculate Payment button and notice that the Payment field in the top grid is updated to 965.02. Than means that you'll need to pay $965.02 per month for 20 years to pay off a loan of $100,000 if the interest rate is 10%.

Now click on the Expand button and take note of the figures in the bottom grid. The bottom grid shows you that in Month 1 you owe the bank $100,000 (Balance), you're paying $833.33 Interest and only $131.69 off on the loan (Capital) giving you a total Payment of $965.02 (Interest + Capital). If you scroll down the gird, you'll notice that for the first 13 years you're paying more interest every month than you're actually paying off on the loan (Capital). Also notice right at the bottom of the Payment column that you're paying a total of $231,598 over the 20 years.

There are various way to use the Loan Repayment Grid to look how you can save money on your loan. Though they all boil down to paying extra every month or on some months, it depends on how you want to approach the matter. Let's look at a couple of them.

Option 1 - Increase the monthly payment figure

Above we discovered that you need to pay $965.02 every month to settle your loan in 20 years. If you know that you can comfortably increase that payment to $1000.00 per month, let's see how much you can save by doing so.

Change the payment figure in the top grid to 1000 and click the Expand button again (without clicking on Calculate Payment) . Notice at the bottom of the Payment column (bottom grid) that your total payment has reduced to $215,906. So, by paying an extra $35 every month, you've saved $15,700 in total. Big saving for a small monthly increase in payment.

Option 2 - Invest your bonus

Let's assume you cannot afford to increase your monthly payment, but you do get a bonus or 13th cheque every year and you know you can pay $1000 extra every year when you receive your bonus. To keep things simple we'll assume you start your loan in January and receive your bonus in December, so we'll put an extra payment of $1000 on every 12 months.

Click on Calculate Payment to reset the payment to $965.02 and then click on Expand to populate the bottom grid. Your total payment should now be back to $231,598.

Now scroll to Month 12 in the bottom grid and type 1000 into the Extra column (far-right). Do the same for months, 24, 36, 48 and 60. Click on the Expand button again to recalculate the bottom grid. Notice that your total payment has reduced to $211, 872. So, by paying $1000 extra once a year for only the first 5 years, you're saving a total of $19.734.

Option 3 - Specify the period

Let's say you do not want to spend 20 years settling this loan and you want to settle it within 15 years. How much will you have to pay per month to settle it in 15 years?

Click the Clear button to reset the bottom grid. Now change the Years field in the top grid to 15 and click Calculate Payment. The payment column in the top grid shows that you need to pay $1,074.61 per month to settle the loan in 15 years. Now click the Expand button and notice that the total payment goes down to $193,427. So, for $110 extra per month, you can save $38,179 per month.

That's about it. The Loan Repayment Grid can help you to get some ideas on how to reduce the total interest you're going to pay a bank for your loan. It's up to you to play around and determine what monthly repayment you are comfortable in committing to.

Important

Please note that we're not taking early settlement penalties into consideration here. Some banks may have a penalty for settling your loan in advance and you should discuss this with your bank before you sign the loan agreement.

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