📚 How to calculate monthly mortgage amortization payments (Question 2). PMT formula (Monthly mortgage & car lease payment)
📚 How to calculate monthly mortgage amortization payments (Question 2) video duration 7 Minute(s) 34 Second(s), published by Study Force on 18 10 2017 - 22:16:35.
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Question: Joe has a Example of using the formula to calculate the monthly payment for a mortgage (home loan).
How to use the PMT formula to calculate a monthly mortgage/loan repayment Mortgage ,Loan ,Mortgage ,Mortgage Payment ,Interest Calculator , Interest Rate ,Buy Mortgage,First Buyer ,Calculator Uk,Best Mortgage ,Mortgage Interest How to calculate monthly mortgage & car lease payment using Excel.
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Question: Joe has a $398,000 mortgage. He locks in at 4.3% interest, compounded semi-annually, amortized for 20-years.
a) Calculate his monthly mortgage payments.
b) What percent of the total paid is interest?
What you'll need:
Present value (PV)
PV=R[〖1−(1+i)〗^(−n) ]/i → solving for R gives us → R=(PV∙i)/[〖1−(1+i)〗^(−n) ]
Where:
PV=present value amount
R=regular deposit/payment
i=interest rate per compounding period
n=total number of deposits
Since you're making monthly payments, yet the interest is being compounded semi-annually, there is a discrepancy between when payments are made and when interest is compounded. As a result, we'll need to find the effective annual rate (EAR), then use the EAR to find the effective monthly rate (EMR). This will represent the interest, i, in the PV formula.
Summary: Combining the EAR and EMR formula:
i=(1+r/m)^(m/12)−1
Where:
i=interest rate per compounding period
r=rate provided per compounding period
m=frequency of compounding
Effective annual rate (EAR)
Converts a monthly rate to an effective annual rate.
k=(1+r/m)^m−1
Where:
k=Effective annual rate
m=frequency of compounding
r=rate in decimal
Effective monthly rate (EMR)
Converts an effective annual rate to a monthly one.
i=(k+1)^(1/12)−1
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