Amortization Calculator

An amortization calculator applies the annuity formula to a loan's principal, rate and term to produce the fixed payment and the schedule of how each payment splits between interest and principal. Every cash on cash calculator embeds it to derive the annual debt service subtracted from NOI.

The payment on $187,500 at 7.25% over 30 years is $1,279. In the first year about $13,500 of the $15,349 paid is interest and about $1,815 is principal. Cash on cash return subtracts the whole payment, principal included, because principal leaves your account the same as interest does.

The principal portion is not lost. It becomes equity, and total return counts it back. That is one reason cash on cash understates the return on a leveraged property, and one reason a deal with thin cash flow can still build wealth. The amortization schedule also shows how the principal share grows each year, which is why cash on cash on the original cash invested is a first-year figure.

Further reading: Amortization Calculator on Wikipedia.