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This article was co-written by Dmitriy Fomichenko. Dmitriy Fomichenko is the president of Sense Financial Services LLC, a small financial company that provides self-directed retirement accounts with a central checkbook control in Orange County, California. With over 19 years of financial planning and consulting experience, Dmitry has helped and trained thousands of people on how to use self-directed IRAs and Spo 401k accounts to invest in alternative assets. He is the author of “IRA Makeover” and a real estate agent in California.
This article has been viewed 3,439 times.
If you’re considering buying a home or other property, you may need to figure out how to get a mortgage. This is a special loan for the purchase of real estate and usually has a lower interest rate than other loans. Since this is an asset-secured loan, the lender, in many cases a bank, has the right to seize the property if the borrower fails to pay. [1] X Source of Research As such, finding the loan with the lowest interest rate is crucial so that you can repay it responsibly and within a reasonable amount of time. You can calculate your monthly payment according to the following guide to make the right choice.
Steps
Calculating mortgage loan payments using the Spreadsheet program
- For simplicity, we will focus on the Microsoft Excel PMT function. The process of doing and entering numbers can be identical or similar to any other program you are using. Refer to the help or customer service tab if you have problems using this function.
- rate is the monthly interest rate. Note: this will be the result obtained by dividing your annual interest rate (the interest rate stated on the loan agreement, for example 4% or 5%) divided by 12. This must be calculated as a decimal. feces.
- For example, if your annual interest rate is 6%, you divide this by 12 to get the monthly rate. We have 6%/12, which is 0.5%. However, the number entered in the equation is a decimal, so we continue to divide this number by 100. That’s 0.5%/100, which is 0.005. This will be the monthly interest rate you will use to calculate your mortgage payment.
- The above calculation can also be done in a different order (6%/100 = 0.06, 0.06/12 = 0.005).
- nper stands for “number of periods,” which is the total number of times you’ll make payments on your loan. For the monthly payment, this will be 12 times the number of years of the loan.
- For example, you have a 15-year mortgage. So the value of “nper”, or the number of your payouts, will be 12*15, which is 180.
- pv is shorthand for “present value”, but here the number is simply your loan principal.
- In this example, let’s say you have a loan of $100,000. This will be your “pv” value.
- Don’t worry about the other two values; If these two boxes are left blank, the program will default them to 0.
- In the example above, this would be entered as =PMT(0.005, 180, 100000).
- The result calculated according to the data and the function described above is – 843.86 USD. Multiply this number by -1 to get a monthly payment of $843.86.
Calculate the amount payable using the equation
- M is your monthly payment.
- P is the principal loan amount.
- r is the monthly interest rate, calculated by dividing the annual interest rate by 12.
- n is your number of payments (the number of months you will have to pay for the loan) [6] X Research Source
- For example, let’s say you have a $100,000 mortgage with an interest rate of 6% per annum for 15 years.
- So “P” would be $100,000.
- With “r” you will enter the monthly interest rate, so 0.06 (6%) divided by 12 gives 0.005 (0.5%).
- With “n” you would enter your total payments, pay once a month and pay over 12 years, which is 12*15 for 180.
- In this example, your complete equation would be: USA=$100,000 won0,005(first+0,005)180(first+0,005)180−first{displaystyle M=$100,000{frac {0.005(1+0.005)^{180}}{(1+0.005)^{180}-1}}}
- After this step, your sample equation should look like this: USA=$100,000 won0,005(first,005)180(first,005)180−first{displaystyle M=$100,000{frac {0.005(1.005)^{180}}{(1,005)^{180}-1}}}
- This step is done by entering the value added in brackets, in this example (1,005), then pressing the exponent button, then typing the value “n” and pressing enter or =. In the example, the calculated result is 2,454.
- If your calculator doesn’t have an exponent function, you can type the calculated value in brackets into a Google search followed by the string ^(n), making sure to replace the “n” in brackets with the value value “n”. The search engine will help calculate this value for you.
- Note that only the value inside the brackets is exponential, not the “r” value outside the brackets (in front) or the -1 at the end of the equation.
- After this step, the sample equation will look like this: USA=$100,000 won0,005(2,454)2,454−first{displaystyle M=$100,000{frac {0.005(2,454)}{2,454-1}}}
- The sample equation will look like this: USA=$100,000 won0,012271.454{displaystyle M=$100,000{frac {0.01227}{1.454}}}
- Following the example above, your equation should now be: USA=$100,000∗(0.008439){displaystyle M=$100,000*(0.008439)}
- In this example, the monthly payment would be ($100,000) * (0.008439), which is $843.90.
Create amortization schedule
- Number of payments.
- Payment amount.
- Original payment amount.
- Interest payment.
- Loan balance. [8] X Research Sources
- Cell A7 should be your first payment, number 1.
- Cell C7 is the payment amount. [9] X Research Source
- If the loan payments column doesn’t update the amortization schedule on its own, enter “=(A7+1)” in cell A8 (2nd payment) and scroll down to the bottom of your schedule. The remaining cells will then update themselves.
Advice
- This can also be a useful way to compare mortgage plans. For example, you can decide between a 15-year loan with a 6% interest rate or a 30-year loan with a 4% interest rate. The calculator will make it easy to see that, despite the higher interest rates, a 15-year loan is still the cheaper option.
- Depending on the terms of your mortgage, you may pay more than required each month and the balance will be charged to interest or principal. Contact your lender to check if you can.
- The easiest way to calculate it is to use an online mortgage calculator. An online calculator that can help you calculate your monthly payment requires only a few key pieces of information. Try searching for “mortgage calculator” with your preferred search engine. Typically, you’ll have to enter details about your loan, like the number of years, the annual interest rate, and the principal amount. Then just press “calculate” and the screen will give you whatever it takes. [11] X Research Source
This article was co-written by Dmitriy Fomichenko. Dmitriy Fomichenko is the president of Sense Financial Services LLC, a small financial company that provides self-directed retirement accounts with a central checkbook control in Orange County, California. With over 19 years of financial planning and consulting experience, Dmitry has helped and trained thousands of people on how to use self-directed IRAs and Spo 401k accounts to invest in alternative assets. He is the author of “IRA Makeover” and a real estate agent in California.
This article has been viewed 3,439 times.
If you’re considering buying a home or other property, you may need to figure out how to get a mortgage. This is a special loan for the purchase of real estate and usually has a lower interest rate than other loans. Since this is an asset-secured loan, the lender, in many cases a bank, has the right to seize the property if the borrower fails to pay. [1] X Source of Research As such, finding the loan with the lowest interest rate is crucial so that you can repay it responsibly and within a reasonable amount of time. You can calculate your monthly payment according to the following guide to make the right choice.
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