Discover the Best Estimation Bill Format for Mortgage Management

Estimation bill format for Mortgage

in this lesson we're going to talk about how to calculate your monthly mortgage payment so let's say if you take out a mortgage to buy a home let's say the face value of the loan is 400k and let's say this is a 30-year loan and the interest rate we'll say it's a a 5% fixed annual interest rate with this information what is the monthly mortgage payment how can you calculate it well there's a formula that you could use the monthly payment is going to be the Principal time the annual interest rate / n and all of this is going to be divided by 1 - 1 + r / n raised to the NT so in this problem the principle is basically the balance of the loan which is 400k R so let's write this down so p is 400,000 R is the annual interest rate which is 5% but we need to convert that to a decimal so if you take 5% and then divide it by 100 this is going to be 05 so that's the value that we need to plug in for r n is the number of payments made every single year since we're trying to calculate the monthly payment and there's 12 months in a year and it's going to be 12 T is basically the term of the loan in years so this is a 30-year loan or it has to be paid back in 30 years so T is 30 now all we need to do is plug this information into the formula and that's going to give us the monthly payment that we have to pay back in 30 years every month to paid this balance off now let's go ahead and plug this information in and get the monthly payment so we have P which is 400,000 and then times r r is 05 / n n is 12 and then that's going to be divid 1 - 1 + r/ n so 05 over 12 raised to the negative don't forget that negative sign n is 12 and then time t or time 30 so let's do this one step at a time so it's going to be 400,000 * 05 / 12 that's 1, 600 66.6 repeating now I'm going to plug in 1+ 05 / 12 and get the decimal value of that part so that's 1.4116 repeating 12 * 30 is 360 so in 30 years you're going to make 360 monthly payments now let's go ahead and plug this in by the way you may want to add a few sixes after the decimal to get a more accurate answer and don't forget to add the parentheses inside the brackets as well so the answer that I got is$ 2,147 and 29 if you round it it's 2147 2865 but I round it to near a cent so that is the monthly payment that you need to pay back for this loan given this information that we have here