How to Calculate Mortgage Payments | BeatTheBush

how's it going everybody this is vida

Bush today I'm going to show you how to

calculate the mortgage payment based on

the loan terms suggestions principle

borrowing amount the interest rate and

the loan link calculating a mortgage

payment is kind of tricky if you just

think about it because every single

month when you pay into it the principal

amount reduces so you end up paying a

little bit less interest every single

time and at the same time you pay a

little bit more principal harder to

calculate the monthly payment and you

want equal monthly payments to

throughout the whole term of your loan

then that gets a little tricky how the

heck do you do it you actually write out

a spreadsheet and just do it line by

line for 360 lines there's actually a

formula for this initially right here

I'll share a spreadsheet down in the

video description below where it'll

actually calculate it line by line and

it would also give you the monthly

payment based on this equation and you

can see that they're actually the same

thing if you just look at this equation

there might be a little bit hard to

decipher so my purpose here is to just

explain to you how this works so you can

actually look at the equation and plug

in the right numbers yourself for

example let's say you have a $300,000

loan you have a 4% APR you have a

30-year fixed-rate loan now the interest

on a mortgage payment actually does not

compound every single day or

continuously it compounds every single

month so once you borrowed a loan they

calculate how much interest you earn one

month later and then they add it to your

principal then they take out your

payment which includes the interest and

a little bit of the principal the thing

to keep in mind here is that 4% APR is

4% over one year in order to get the

monthly interest that you have to pay

you divide that by 12 because there's 12

months in a year otherwise you don't

want to pay 4% every single month right

so if you have 200k you don't want to

pay $8,000 every single month in terms

of interest so you divide this down by

12 so R in this equation is actually the

interest rate the big R divided by 12

now because you have a 30-year mortgage

you're actually going to compound this

30 times 12 times and here 30 times 12

is 360 so we can plug all this in and

I'll actually calculate your monthly

equal payments over the life of the loan

so P is the 200 K and then you multiply

it by little R which is

4% divided by 12 so it's really point

zero 4 divided by 12 it's not 4 divided

by 12 because 4 is a percentage that's

why you use point O 4 and then all of

this over 1 minus 1 divided by 1 minus R

R here is 0.04 divided by 12 and then

all of this could an exponent of n which

is 30 times 12 or which is 360 when you

work out this equation in some

calculator or something then it will

give you the proper amount where they

actually got this equation is a little

bit complex because there's like a

mathematical proof here so I hope this

equation is good enough for you and not

that you need a mathematical proof if

you want to look deeper into it and just

kind of play around with maybe

prepayments and stuff I did make a

spreadsheet you can go and download it

in the video description below or

through my Dropbox and you can grab that

spreadsheet and then you can change the

principal amount of your loan change

their APR that you get change to the how

many year mortgage that you did you end

up getting then you can calculate your

actual monthly payment one thing I want

to quickly mention is that whenever you

refinance if let's say you had a 30 year

loan and you were paying for several

years already and then all of a sudden

you refinance to the same exact interest

rate and yet it's 30 years again you

essentially extend it the length of your

loan because you essentially extend it

for two extra years that is why if you

refinance with the same exact term your

mortgage payment would go a little bit

lower because you're just kind of

dragging things out a little bit longer

so I hope this helps you calculate your

own equal monthly payment on a mortgage

in the spreadsheet it will also show you

accumulated interest payments that you

paid and also accumulated principal

payments this is usually an eye-opener

because if you look at actually how much

interest you pay even at 4% throughout a

30-year loan you actually pay as much

interest in as the principal amount so

let's say $200,000 is the principal that

you paid in by the time you end up

paying the loan in full you pay another

$200,000 of interest this is only if you

drag it out for 30 years so a lot of

people would try to pay early so that

they would reduce their interest

they pay on the mortgage you don't

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