Manually calculating the monthly premiums on a given loan is rather simple, however it does require some basic algebra skills---or access to the Internet. The formula to calculate a mortgage is M = P [(R/12)(1 + (R/12))^n ] / [ (1 + (R/12))^n - 1], where M = the payment per month, P = the principal on the loan, R = the annual interest rate, and n = the amount of months to repay loan.
Difficulty: Moderately Easy
Instructions
1)Divide your annual rate of interest (R) by 12 and write it down. This can be, essentially, your monthly interest rate, which we'll reference inside the following steps as r.
R/12 = r
2)Add 1 to r and take that new number towards the power of n, where n equals the quantity of months in your loan. As an example, in case your loan is made for 3 decades, then n equals 360. This will demand a calculator having a y^x function, or perhaps the manual calculation of (1+r) times itself n times. We'll refer to this as new number x.
(1+r)^n = x
3)Multiply x by r. Divide this new number by x minus 1. We'll label this number y.
(x)(r) / (x-1)
4)Multiply y from the loan principal (P). The resulting number may be the monthly loan payment (principal and interest) on the loan.
(y)(P) = Monthly Payment
5)Numerous websites have free mortgage calculators. You'll find a hyperlink for some within the Resources section. Simply input the interest rate, the duration, and also the level of the loan, and the websites can do the remainder.
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