How to Calculate Your Monthly Mortgage Payment by Hand.
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A Mortgage is used by purchasers of genuine property to raise funds to purchase a real estate or by already existing owners to raise fund for any other purpose while putting a lien on the property that is being mortgaged.
Before you hurdle into buying a home often the biggest purchase of your life, you need to know that you can have enough money for the monthly mortgage payment. You could calculate the payment using a fast online calculator, but if you want to see how all the variables work hand in hand, you can do it by hand using the mortgage monthly payment formula.
The formula for calculating your mortgage monthly payment requires using proponents, so unless you can do those with your brain, you’ll need a calculator to assist.
In this article, we are going to focus on how to calculate your monthly mortgage by hand.
1. You Have to Understand the Equation
In order to calculate the monthly payment, we can rely on a relatively simple equation. The monthly payment equation can be represented as follows:{displaystyle M=P{frac {r(1+r)^{n}}{(1+r)^{n}-1}}}. These variables represent the following inputs:
M is your monthly payment.
P is your principal.
R is your monthly interest rate, calculated by dividing your annual interest rate by 12.
N is your number of payments (the number of months you will be paying the loan)
2. Then Input Your Information into the Equation
You will need to input your principal, monthly interest rate, and the number of payments in order to find your monthly payment. This information can be easily found in your loan agreement or from a quoted loan estimate.
Check the information again to be sure of its accuracy before using it in calculations.
For example, imagine you have a $100,000 mortgage loan with 6 percent annual interest over 15 years.
Your input for “P” would be $100,000.
For “r,” you would use your monthly interest rate, which would be 0.06 (6 percent) divided by 12, or 0.005 (0.5 percent).
For “n” you would use your total number of payments, one for each month in fifteen years, which would be 12*15, or 180.
In this example, your complete equation would look like this:{displaystyle M=$100,000{frac {0.005(1+0.005)^{180}}{(1+0.005)^{180}-1}}}
3. Simplify Your Equation by Adding 1 to the “r.”
Simplify your terms by doing the first step in the order of operations, which is adding the 1 and “r” inside the parentheses on the top and bottom of the equation. This is a simple step that will make your equation look much less complicated.
After this step, your sample equation would look like this:{displaystyle M=$100,000{frac {0.005(1.005)^{180}}{(1.005)^{180}-1}}}
4. Solve the exponents
The results inside the parentheses, (1+ r), from the previous step, must now be raised to the power of “n.” Again, this “n” represents the total number of payments. This step requires a calculator with an exponent function, which is usually represented like this:{displaystyle x^{y}}
This is done by entering the value to be raised, (1.005) in the example equation, then pressing the exponent button, then entering your value for “n” and pressing enter or =. In the example, the result comes out as 2.454.
If you don’t have such a calculator, type your values from the last equation into Google followed by ^(n) while replacing the “n” in parentheses with your value for “n.” The search engine will calculate this value for you.
Keep in mind that only the figures inside the parentheses will be raised to this power, not the “r” outside of them (at the front) or the -1 at the end of the equation.
After this step the sample equation would look like this:{displaystyle M=$100,000{frac {0.005(2.454)}{2.454-1}}}
5. Simplify again.Here, you should multiple “r” times the result of the last step on the top (the numerator) and subtract 1 from your result on the bottom (the denominator).
The same equation would look like this after this step:{displaystyle M=$100,000{frac {0.01227}{1.454}}}
6. Divide the numerator by the denominator.
This means dividing the top part of the equation by the bottom part of the equation. This should leave you with a small decimal.
In the example, your equation would now be:{displaystyle M=$100,000*(0.008439)}
7. Multiply “P” by this result.This will give you your monthly loan payment.
In the example, this would be ($100,000)*(0.008439), or $843.90. This represents your monthly payment.
In summary, the above-listed processes are how to calculate your monthly mortgage payment by hand. So if you want to calculate your mortgage the above processes will serve as a guide.
NG Team.
