How is your monthly Payments Calculated?

Amortization is the amount of debt that is no longer owed upon the loan. A conventional loan payment includes principal, interest plus any other expenses that the loan institution must be certain that the borrower pay when they are due to be certain that their interests are protected , such as insurance, association dues and real estate taxes.

How did they invent the number that must be paid each month? Where did it come from? The amount of money that you are borrowing (principal) plus the profit (interest) that the loan company insists upon earning for the use of their money. Somehow a person is paying a lot of interest and very little principal the first couple of months. In the beginning the borrower owes interest on the total amount borrowed.

Calculating the Configuration

• information: Amount Borrow and the interest rate
• M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
• M = monthly mortgage payment
• P = the principal amount
• monthly interest rate: annual rate / 12 months
• n = the total number of payments over the life of the loan.

• Is the loan being paid monthly? That is 12 months per year.
• Number of years? a 30 year mortgage? 30 years x 12 months that equals = 360 months
• The total amount owe if the mortgage keep to full tterm /divided by the number of months equals Amount owed per month
• Your annual interest rate is divided by 12, Interest Rate / 12 months yeilds interet rate per month
• Multiply the total principal by the monthly interest rate that is the first months interest amount. The monthly payment amount - minus the interest yeilds how much principal was paid. That amount is now deducted from the total principal amount, which yields the new principal amount to multiply by the monthly interest amount.

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