How To Calculate Loan Payments and Amortization on the Back of an Envelope With a Cheap Calculator

In a previous article we presented a simple formula to calculate the amount of a monthly home mortgage loan payment. The formula applies to any compound interest loan. The only special equipment you need is a calculator with a power function key. That's the key with the y superscript x (y ^ x). If you have kids in school you probably already have one.

Here is a review of monthly payment formula.

The variables are:

N = loan period in months. i.e. 20 years = 240 months.

R = interest rate in whole numbers. i.e. 8% written as 8.

P = principal amount of the loan. The amount borrowed.

Q = the Q factor. An intermediate calculation.

M = monthly payment amount

Here's the entire formula for the monthly payment amount of a compound interest loan:

M = (P * R * Q) / (1200 * (Q -1))

Easy enough, but first you have to calculate the value of Q. Here is the formula:

Q = (1 + R/1200) ^N. Pretty simple, but you do need the power function key. N can get large.

In our earlier example we calculated a monthly payment of $418.22 on a $50,000 second mortgage at 8% for 20 years. You have paid the 2nd mortgage loan for 5 years (60 months). The pay off amount is $43,763 (rounded). This is how to calculate the pay off amount on any compound interest loan after N number of payments.

This is an easy three step process with a subtraction at the end. First calculate the growth value of the loan amount (P). P increases by a factor of (1 + R/1200) per month, so after N months the value of the principal amount of the loan would have inflated to P * (1 + R/1200) ^ N. For the current $50,000 second mortgage the calculation looks like this:

50000 * (1 +8/1200) ^60 = 74492.28 (step one)

The monthly payments have also inflated by a factor of (1 + R/1200) per month so in math talk we have a geometric series with n terms. The monthly payment part is a little more complicated and the formula looks like this:

1200 * M * ((1 + R/1200) ^N -1) / R

Plug in the actual values and it looks like this:

1200 * 418.22 * (1 + 8/1200) ^60 / 8 = 30729.49 (step two)

Now finish up by subtracting the inflated repayment value from the inflated loan amount value to get the pay off amount:

74492.28 - 30729.49 = 43762.79 (pay-off)

Once you know how to calculate the monthly payment and pay-off amount for any compound interest loan on the back of an envelope, you can noodle mortgage and car loan what-ifs from anywhere.

Bake Chicken Foods

Continuar leyendo

Ocultar articulo

Mortgage Calculator or Amortization Table?

Both a mortgage calculator and an amortization table can be used to find out the monthly payment required on the property you would like to buy, but they approach the calculation differently.

Although they have similar functions, the mortgage calculator and the amortization table each have their own place in your mortgage control system.

Mortgage calculators range from ones that calculate a simple loan, to those that can work out exactly how much you can afford, to those that will determine how much you can borrow for a home loan depending on your current situation. Mortgage calculators are a good way for you to get a general idea of what you need.

An amortization table, on the the other hand, is an extensive spreadsheet of every detail of each type of loan, length of loan, interest rate, and many other factors that can confuse a novice.

A mortgage calculator may not give you as much information as an amortization table, but it may present basic information clearer and quicker. Once you have a good idea what you want in a loan, then an amortization table can help you delve deeper into the long-term ramifications of the loan.

They can be used separately, but their strength lies in a combination of both to enable a closer watch of the financial picture of your mortgage.

Bake Chicken Foods

Continuar leyendo

Ocultar articulo

Free Amortization Schedule Calculator

Visual Mortgage Loan Calculator developed a freeware Loan9.net, you can calculate mortgage repayments and create amortization tables, without a thorough knowledge of finance or computers. It allows you to analyze various combinations of loan amounts, interest rates, loan terms, etc. in order to determine the best loan for your budget. It 'compatible with Windows 9x, Me, 2000 and XP.

Heritage Home Loan by Loan-Labs.com shouldCalculate mortgage loans and repayments and create amortization schedules. The program is easy to calculate loans and variable rate of compensation is independent of the local currency. You can with the dollars, euros and pounds, etc. calculate amortization schedules for mortgages Americans, Canadians and British, personal loans, auto loans and other types of loans can be used.

Loan Calculator (www.LoanCalculator.ws) includes amortization software for loan payments on the estimatedHouses, cars and refinances. It supports regional currency settings and works with a wide range of repayment cycles from 1 month to 50 years, including real-time computing. All you have to do is enter the loan amount, the duration of the loan, annual interest rate, and the program will generate full repayment of the loan.

Mortgage payment (www.mortgagecalculators.ws) is a financial software designed to estimate monthly expenses for a mortgage. These include interestThe payments, property taxes and insurance of private mortgages. After entering the amount of the mortgage loan, loan duration and interest, the program generates a complete mortgage amortization schedule with charts.

Free Financial Calculator Software ([computer http://sg.geocities.com/wealth_ /]) can be used to perform basic calculator functions, as well as some financial calculations such as cash flow, future value, present value, leading interest loansor amortization, monthly payment, principal paid, interest, balance, effective or nominal interest rate, internal rate of return, modified internal rate of return and net present value.

Bake Chicken Foods

Continuar leyendo

Ocultar articulo