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 principal and interest over the loan's life. A BRRRR calculator embeds it to compute the debt service on the refinanced loan, which is the payment the rent has to cover.

On $195,000 at 7.25% over 30 years the payment is $1,330 a month. In the first year about $14,050 of the $15,963 paid is interest and about $1,900 is principal. The whole payment counts against cash flow; the principal portion comes back as equity.

The hard money loan during the hold is interest-only and needs no amortization schedule: $135,000 at 11% is $1,238 a month, fixed. The contrast is the strategy in miniature. Expensive, simple debt for the months the property is a project; cheaper, amortizing debt for the years it is a rental.

Further reading: Amortization Calculator on Wikipedia.