How do you figure amortization by hand, without the help of a mortgage calculator?

Question

Is there a formula that I could simply plug the numbers into that would give me the amount of the payment for $137,500 with a 5.25% interest rate for 30 years?

Im sorry, I can't figure out that formula, could you please explain it step by step so that I can figure out how to use it for other equations? Thank you, also, I know how to use a mortgage calculator, need to learn how to do this without one.

Thanks for the extra part, that does help a lot :)

Answer 1

OK

Here is the formula
=A/(1-(1/((1+(i/12))^(p*12))))/(i/12)

Where A is the amount (137,500), i is the interest rate (5.25) and P = the payment period (number of years (30))

For you .......

759.28

As an aside, note that for i, I divided by 12 to get the monthly rate and for p, I multiplied by 12 to get the total number of payments

Hope that helps.

==============

OK - Here is the key. The denominator is an amortization formula that you can find in most Finance books. It has to do with the fact that the interest you are paying is calculated over the time. What becomes difficult is doing the "power" piece of the equation. In your case 1+(.0525/12) or 1.004375 to the 360 power is extremely difficult without a calcualtor.

The way I have the forumla setup, the number is the denominator is about 181.09. When you divide your amount that you are borrowing over the 181.09 you will get your payment.

That 181.09 becomes larger as the i goes lower. And that 181.09 get smaller, thus making the payment be more, as the i goes higher.

Hope this additional information is helpful.

Answer 2

Unless you have a fixed-rate mortgage, the current mortgage interest rates are very important to deciding how much you should pay every monthcompanies offer different interest rates so it is a good idea to shop around for the best deal before settling on one particular lender.

Answer 3

Okay, let L = loan, P = payment made at the end of each month , r = monthly interest rate ( 0.0525/12) .1st month: L + L r -P is debt or L [1+r] - P, call this L1...2nd month L1 + r L1 -P or L1[ 1 +r] -P is the new debt L2. 3rd month; L2 + r L2 - P = L2 [1+r] - P or L[ 1+r]^3 - P( [1+r]^2 +[1+r] + 1 )..if you can see the pattern then after 30 years [360 months] L[1+r]^360 - P(......) should be zero and (....) is a geometric sum with value { 1- [1+r]^360} /{1 -[1+r]}...solving for P we see P = (L[1+r]^360..[-r] / {1-[1+r]^360})...using your data P = $759.28

Answer 4

You need a mortgage calculator. the payment is $759.28 that doesn't include taxes and insurance.

Answer 5

Try this, might be a little easier.

http://www.bankrate.com/brm/mortgage-calculator.asp