How to Calculate Your Mortgage
Buying a home is simultaneously an exciting rite of passage, a sign of success and a mentally strenuous ordeal. When you need to take out a mortgage to buy your home, you want to know how much of the loan to pay back every month. When you understand how banks calculate your mortgage, you can understand how much you can expect to pay and why.
First: Calculating it yourself
If you are a math whiz, you can figure out how to calculate your mortgage payments by understanding the concept of fixed rate and variable rate mortgages. If you have a fixed rate mortgage, your interest rate stays the same as the interest rate was when you were approved for the mortgage. If you have a variable rate mortgage, your interest rate goes up or down with the current rate of interest. It is much easier to calculate a fixed rate mortgage with an online calculator such as the one available here.
Second: Amortization
When your mortgage is amortized, that means you eliminate your debt over time with regular payments that go down each month as long as you meet the minimum payment. Part of the payment covers the interest you owe while the other part pays down your principal; with each payment there is less to pay off each month, so the monthly payment goes down each month. The mathematical equation which represents this is I = PRT where I equals interest, P equals principle or the initial amount of the debt, R equals the rate of interest and T equals the time it takes to pay it off.