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Are you the "spreadsheet type"? If you are, do your own mortgage math within Microsoft Excel, Mac Numbers and/or Google Docs. All you need are some formulas and mortgage rate to add to the mix.
Click here for a mortgage rate to add to your formulas.
A standard, amortizing mortgage payment is comprised of two parts -- principal reduction and interest repayment. Amortizing loans are the most common loan type, and apply to 30-year fixed loans, 15-year fixed loans, and home equity loans.
Finding the monthly (principal + interest) payment on an amortizing loan is among the simplest of the spreadsheet mortgage formulas. You'll need to know 3 pieces of information about your loan, and how to assign those values to the formula's variables.
The formula's variables are :
The standard mortgage payment formula also contains two extra variables, you'll notice -- Future Value and When Due. Both should be equal to 0. This tells the spreadsheet that the home will eventually be paid off to $0, and that interest on your mortgage will be paid in arrears.
Place this formula either (1) in the cell into which you're trying to solve, or (2) in the formula bar at the top of your spreadsheet.
Also, make sure to add a negative (-) in front of the formula.
With an amortizing loan, the amount of principal included in your payment starts off small, then gets bigger over time. If you've ever noticed how your loan balance is barely dented after 5 years of payments, this is why. It's amortization at work.
On a 30-year fixed rate mortgage, for example, it takes 18 years before your mortgage payment pays more principal than interest. Until then, you're paying more than 50% interest monthly.
Whether your mortgage is conforming, FHA or with the USDA, its amortization is decidedly bank-friendly.
To calculate how much principal you're paying in any given month, you'll need to know 4 pieces of information about your loan, and how to assign those values to the formula's variables.
The principal payment formula also contains two extra variables -- Future Value and When Due. Both should be equal to 0. This tells the spreadsheet that the home will eventually be paid off to $0, and that interest on your mortgage will be paid in arrears.
Place this formula either (1) in the cell into which you're trying to solve, or (2) in the formula bar at the top of your spreadsheet, and make sure to add a negative (-) in front of the formula.
In the example shown, the homeowner's first mortgage payment contains $395.06 of principal paydown.
Interest charges are the "other half" of your monthly mortgage payment; the portion not covered by principal. But unlike principal payments which increase over time, interest charges fall over time.
You pay less interest toward the end of a loan than you do at its start.
To calculate how much interest you're paying in any given month, you'll need to know 4 pieces of information about your loan, and how to assign those values to the formula's variables.
The interest payment formula contains the same two extra variables -- Future Value and When Due. Both should be equal to 0. This tells the spreadsheet that the home will eventually be paid off to $0, and that interest on your mortgage will be paid in arrears.
In the example shown, the homeowner's first mortgage payment contains $1125.00 in interest charges. If we add this to the principal payment of $395.06 solved for in Formula #2, we're left with a payment of $1,520.06 -- the exact figure solved for at the top of the page.
Whether your spreadsheet of choice is Microsoft Excel, Mac Numbers, or Google Docs, you can always find mortgage formulas to help you "do the math".
And, because most spreadsheets have a built-in formula browser, it's easy to plug-and-play to solve for what you need. You'll just need a live mortgage rate to plug into your math.
Click here for live rates you can add to your formulas.
Dan Green (NMLS #227607) is an active loan officer with Waterstone Mortgage. Email Dan ator call 513-443-2020.
Bonus: Click to get a free, no-obligation rate quote. I love to work with my readers!
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