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Finally, a calculator that goes beyond just computing monthly payments!

I’ve tried a few of the other online mortgage and installment loan calculators, e.g. Yahoo! Finance has a decent one, but none of them that I’ve found have a place where you can find out what kind of impact adding additional principal payments will do to paying off your loan early.

So I created the following calculator in Microsoft Excel that you can easily use to compute the monthly payments on anything with a regular installment loan, whether it’s a mortgage, car, boat or similar amortized loan.

You can enter information in any field labeled with green. You will notice there’s a column entitled “Additional” in the amortization schedule. This is where my spreadsheet is different from the online calculators that just show you monthly principal and interest! Any amount that you type into this “Additional” column will show you the impact of paying down your loan faster. Whether it’s adding $50 to each month, or making one extra payment in the 1st, 12th, or 24th month, etc. you will instantly see the difference that it will make in how quickly your loan gets paid off.

When you add in additional principal payments you will notice that the loan balance will go to zero or even negative sometime before the last scheduled payment. The month that the loan goes to zero or negative is the point where it will be paid off! Leaving the “Additional” column empty will cause it to take exactly the number of periods to pay off the loan that you took out, so a 30 year mortgage would take all 360 months but adding in one extra principal payment in the 12th month and suddenly you knocked the last 7 years or so off of the loan!

I added in a Second Mortgage field and amortization schedule but this could just as easily be used to compare two loans side-by-side or to compare the effects to paying differing amounts of additional principal on your loan.

Give it a try! Without further ado, here is the spreadsheet in Microsoft Excel! If you are prompted to put in “Authentication” Information such as user name and password just hit the cancel button next to the user name and password fields and it will then download the spreadsheet. I don’t know why it’s asking for that! I don’t have the document password protected! You may also want to right-click on the link and select “Open in New Window”. I apologize for any technical difficulties!

As always, I appreciate your comments and feedback!

When we think about credit, there are certain types of borrowers that are less risky than others. Any loan backed by the government in some way (e.g. student loans, FHA or VA home loans, small business - SBA - loans) are generally less risky in nature than similar loans outside of these programs. And with the current credit market crisis in full swing, the spread in risk between government backed loans and their counterparts are even greater.

I recently touched on banks and lenders wanting to diversify and seek out other types of loans in my blog on January 3rd, 2008 (Banks Ditch Home Loans for Student Loans). Just three short months later, on Wednesday, April 9th, 2008, I opened up the Wall Street Journal and found an article on the front page of the Personal Journal page (D1) entitled “Credit Crunch Hits Private Student Loans.” Now, these aren’t your government-backed student loans; rather, these are the kind you get when you’ve maxed out the amount that the government will loan you. These loans help students that otherwise would be putting payments for books and tuition (in addition to the usual beer and pizza) on credit cards.

It seems that lenders are suddenly finding these loans aren’t the instant savior to the banks’ balance sheets that they thought they were, for a myriad of reasons. Money is becoming more expensive. The banks have to pay interest to the source of funds that they turn around and loan out, i.e. the capital markets. If a bank does not want to pass along increased costs to its customers it can instead choose to restrict the issuance of loans to higher credit customers, and thus the customers that represent a lower default risk. Regardless which path the bank pursues, or if it’s some combination of the two, we are still seeing a contraction in the credit market for student loans that is only being somewhat offset by the federal government increasing the amount that students can borrow in the federally-backed loan program.

What will be next? We’ve already seen higher costs or restricted lending practices with respect to real estate. Now private student loans are feeling the sting.

Car loans? Yes, car loans should be an interesting line of credit in the market considering all of those 0% new car loans that were freely available a couple of years ago. Car loans are still quite cheap considering the terms of the loan are often 36 months to 60 or 72 months. But I fully expect auto loans to climb at least 1 point but up to 3 points in the coming quarter to six months as credit markets tighten across the board.

With the auto industry is already hurting, higher interest rates on loans won’t help that sector recover anytime soon. Regardless whether you’re Toyota, GM, or Ford, you still don’t want to be in a business where consumers’ have less buying power and will therefore think twice before pulling that new sedan off the lot.

Steer clear of the auto industry related stocks for a while. These stocks won’t be a buy until credit becomes more readily available and incomes start to rise again.

As always, I welcome your feedback…

Yesterday I read an article that National City Corporation, with headquarters in Cleveland, Ohio, is laying off approximately 900 people that work in its mortgage division and is no longer accepting loans from mortgage brokers.

As a quick aside for those readers out there who have never shopped for a mortgage or did not realize there are different types of lenders, we have mortgage bankers and mortgage brokers. A mortgage banker is typically an employee of the bank, “the loan officer” in your friendly neighborhood branch, whereas the mortgage broker is like an independent agent that takes your loan application and sends it to multiple lenders to (supposedly) try to find you the best deal that they possibly can in the market. Mortgage brokers of course charge you a fee to do this service and/or they receive a fee from the lender that makes you the loan.

As the number of foreclosures ticks higher and banks tighten credit standards so fewer people qualify for mortgages, I have noticed an increase in the advertising for non government-backed student loans in the media and especially on tv.

First there were the ads for Astrive, which only caught my attention because they continued to run similar ads with different website addresses. The website address at the bottom of the tv screen always starts with Astrive and then ends in some three-digit number and the usual .com suffix. In the financial world, seeing a company use multiple websites with similar addresses always throws up a red flag in my mind. I am not saying Astrive is a bad company; at this point, I don’t know enough about them. But I am curious why they have multiple website URLs and why they are so similar.

I didn’t think much of the Astrive ads (aside from the various - and seemingly frequently changing - website addresses) because this is the business that Astrive is in. But then I saw a commercial for student loans from Chase Bank. I haven’t seen a commercial for home loans through Chase in quite some time so seeing the commercial for student loans caught my attention immediately.

It is interesting to see that as the mortgage and real estate market has taken a downturn, lenders have turned to student loans, which are repaid over many years - up to 20 in most cases - similar to the 30 years that a home loan is amortized over.

Only time will tell if student loan defaults will become a crisis in our society similar to the foreclosures. Some news commentators and talking heads on tv have speculated that the auto industry may be next with its flat sales and low (or zero) interest loans. Certainly the default risk on a zero percent interest loan is still higher than zero and those loans, when packaged with other interest-bearing loans and sold to investors, would sell at a steep discount.

As always, I appreciate your comments and feedback…