How to Calculate Mortgage Payments

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Since a mortgage principal gradually reduces are you make the monthly payments, the interest accrued reduces as you make payments. This make is so that calculating equal payments of the life of the loan a bit difficult. A brute force method would be to just calculate every payment for the life of the loan and make sure the payment amount results in a 0 payment at the end. In contrast, one can just also use a pre-calculated formula for this.
There's an error in this video. The (1-r)^n term should be replaced with (1+r)^n. The formula in the spreadsheet is correct. Sorry for the confusion.
Mortgage Calc Spreadsheet: www.dropbox.com/scl/fi/13xym8...
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Опубликовано:

20 апр 2017

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Комментарии : 114

@mitchellhutz4991 5 лет назад

Thank you SOOOO much for having the link to that formula!!! It really helped us!!!

@mohamedsheikh2502 4 года назад

you are a great guy ,making it so simple .I had dozen loans ,always trusting the lender , now I can do it my self ,thanks to you .Regards

@BeatTheBush 4 года назад

You're welcome!

@isa_n1037 7 лет назад

The formula is wrong; if you convert to monthly intrest you need to apply this formula to calculate the exact monthly intrest (sqrt 12 (1+APR)) -1. Because the monthly intrest also follows the exponential equation of (1+APR) = (1+r)^12. Furthermore it should be (1+r)^n in the denominator; it is fairly logical because if you sum the intrest with the principal your principal equals 1 and the intrest rate equals r in decimals. You told in some other video that they don't teach this in high school; well actually I teach this in high school to all students. This is in their curriculum; don't know about the curriculum in the USA tho.

@BeatTheBush 7 лет назад

I believe instead or 1-r it's supposed to be 1+r. Thanks for your correction.

@mulieblessed 4 года назад

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@RubenRodriguez-tc9lz 6 лет назад

Hi Beat the Bush, just wanted to say I greatly appreciate your channel. It has definitely helped me a lot! I am going to buy my first home this year and am interested to know your outlook on the “velocity banking” method. The idea is that you can pay off a 30yr mortgage in 5-7 years with a line of credit not sourced from you home equity. There is a 29 minute RU-vid video “How to pay off a 30 year home mortgage in 5-7 years.” I know you did a video on HELOC’s but I’m pretty sure this technique is different. I think it’d be great to hear your outlook on this strategy!

@AppleCrider 6 лет назад

Very informative and helpful!

@davidambiga9910 5 лет назад

How thank you very much this really helped me alot

@basss902a 9 месяцев назад

What a Video! That Mortgage calculator really is helpful. Great Job!!!!

@MaryP2024 5 лет назад

Thank you so much ☺️ you where so helpful.

@BeatTheBush 5 лет назад

@babymend8980 6 лет назад

Beat the Bush!!!... hope you are having a wonderful weekend. So close to Christmas now ⛄🎄😊

@BeatTheBush 6 лет назад

Hey! Merry Christmas! =D

@jayfisk2728 7 лет назад

A real benefit of a high credit score is the ability to get a better mortgage rate. In your example, the difference between a 4% and a 3.75% rate is $19,000 over the life of the loan.

@BeatTheBush 7 лет назад

Hopefully, no one that's watching this channel will drag it out that long if they can help it.

@davelemberg5602 5 лет назад

Downloaded your excel sheet and its extremely helpful! I am a little confused on how the Additional Payment column works though. How would I adjust the formula to only account for an additional payment every so often? Thanks for your help!

@basss902a 9 месяцев назад

Just put in the additional payment. It automatically adds it to the final Value column. An additional payment can be for example, a balloon payment.

@priyeshpriyatam 6 лет назад

Nice explanation :)

@BeatTheBush 6 лет назад

=D Thanks!

@diegoenriquebahamondeberri3599 3 года назад

The equation is wrong. It says: “(1-r)^n”, but it should say: “(1+r)^n”

@lovetosharei5720 7 лет назад

hi beat the bush,thank for the video and Mortgage Calc Spreadsheet you share. i have a question，how did u get the Principle Paid amount ,because in the spreadsheet calc the 1st month Principle Paid is288.16, i using this formule， it is 200k/30y=6,666.6/12month=555.5?

@Austin-ui8in 5 лет назад

BeatTheBush, great videos, thanks for posting! I just had a quick question. When I use the APR that was given by the lender (5.562%) in the quote, the calculation for the monthly payment doesn’t work out to what’s on the quote. Using you equation, I have to use the actual interest rate (4.5%) to come up with the monthly payment listed on the quote. Am I doing something wrong here? I thought you were supposed to use the APR which from my understanding is the interest rate + points, fees, etc. So for the monthly payment calculation, are you supposed to use APR or interest rate? Thanks in advance!

@BeatTheBush 5 лет назад

APR is interest rate. Question is, what is 5.562%? It certainly isn't APY.

@silverplug 7 лет назад

I appreciate the formulahhh!!! Is this what's behind an amortization table?

@BeatTheBush 7 лет назад

Yes. This is the official formula banks use as well to calculate the payment. Of course you may have a few cents off in the last payment.

@silverplug 7 лет назад

+BeatTheBush, Thank you! BTW, I see no steaming fish video link! Is that coming out soon?

@BeatTheBush 7 лет назад

Yes, I will be updating the video link in the next day or so. I'm a little behind on that one. =/

@silverplug 7 лет назад

+BeatTheBush, No, that's fine-I am a big fan of your videos and am looking forward to each and every one of them. Please take your time making them. It's a lot of work, and we can always wait :)

@BeatTheBush 7 лет назад

Thanks much! =D =D The steamed fish video could be found here: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-OXsp0kixwpk.html I also updated the link within the card in the video.

@TaroBigHead 7 лет назад

Hey beat the bush, do you think you can do a video on your thought on Tesla stock?

@BeatTheBush 7 лет назад

Sure, their stock is an interesting case.

@ladonnataylor3552 6 лет назад

Ok I️ hope you can answer this. When I calculate my mortgage payments I will have paid for my home almost 2 1/4 times. So my question is if I take two unconventional drastic steps will it hurt me more or will it help me achieve my goal. The two steps I want to do are converting my 30 year FHA to a 15 or 20 year conventional loan. That will help reduce the amount of interest I will be paying because the payments will be higher. In addition to that step I wanted to know if it’s beneficial to take a loan out of my 401(k) to pay towards my principal. The way I see it the interest gained 401K is higher. But it’s not as high as the interest paid on my mortgage. Once my mortgage is either paid off or so low then I will be able to up my contribution amount to my 401K.

@BeatTheBush 6 лет назад

Refi to lower number of year makes your payment higher which increases your burn rate. So if you have enough cash to cushion this then sure. But you could get into trouble if you are out of a job for a while. You need to do this carefully as it is a matter of solvency. I would not rob your 401k to pay your mortgage. You pay back your 401k plus interest but you are robbing yourself of the long term gain.

@citysurfer1 7 лет назад

Can u talk about paying your mortgage early or doing a 15 vs 30 year mortgage .... is it better to do things on a shorter time line or drag it out and invest the money in the market. It seems if u are paying over a longer time you will pay more interest but it is tax deductible

@BeatTheBush 7 лет назад

I did a vid on paying off a loan or invest a while ago here: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-DjnR_EIA9aM.html Essentially, you have to factor all of that in. You also need to include non-tangible aspects of it such as peace of mind in having no loans. To me, I was estimating it's worth about 2% difference. When you invest, there is inherently risks.

@citysurfer1 7 лет назад

Thanks! I just bought my first house with a 15 year mortgage and trying to see if better to make one extra payment a year or investing that money instead

@BeatTheBush 7 лет назад

Yep. If you ask me, I really do like the security of having a paid off house. However, paying extra is locking your money in so you should only do that with money you have no idea what to do with. What might be good is to pay it off a little and another portion you invest until you have some amount over the entire mortgage as which point you just completely wipe it out and have no payment at all. No payment is the goal after all and the little payment in between only locks your money in.

@pappaflammyboi5799 7 лет назад

BeatTheBush I've been watching these videos lately that use a HELOC to pay down a mortgage faster. Do you have equations for that? Do you have videos which refute or substantiate the aforementioned claims?

@Jupe367 7 лет назад

Is it wise to purchase an out of state property as an investment and rent it out? Can you do more videos on stocks and bond investments.

@BeatTheBush 7 лет назад

I'm not sure since I don't have much experience in this. It does take some abilities to do thing remotely so you need contacts in the area of your investment property in case anything goes wrong. Did you check out my investing playlist for stocks yet?

@MarchaanDotson 7 лет назад

Hi BeatTheBush, this may be a silly question but why would I need to calculate my mortgage payment? Can't I just look at my monthly mortgage statement? Thanks so much!

@BeatTheBush 7 лет назад

This is helpful for someone looking to see how much you need to pay for buying a new place. It's more about learning the nuts and bolts of how they came up with that number. The spreadsheet allows you to adjust and even put in additional payments so you can see how much less interest you can pay.

@kaled255225 4 года назад

i believe it supposed to be P*r/[1-(1/(1+r)^n)], otherwise u'll get a wrong negative value. it should be 1+r, not 1-r

@BeatTheBush 4 года назад

Thanks! I'll have to double check this.

@lxnny2357 3 года назад

What happens when I pay above the monthly payment on a mortgate--does 100% go to principal?

@vacationboyvideos 7 лет назад

u have any videos on investments? (besides the little interest the bank gives)

@BeatTheBush 7 лет назад

Yes, I have a whole playlist on investing here: ru-vid.com/group/PLAffnc1joZvapKhltdbgRrJm1D-CYlesK

@vacationboyvideos 7 лет назад

BeatTheBush thank u! U helping me so much!!! Bless u!!! Stay humble nice kind and keep smiling!! I'm getting all I know to subscribe to u!!!!👍😎😇 Peace!!!!!

@BandosNBread 7 лет назад

You should drop the spread sheet for those that want in the comment section.

@BeatTheBush 7 лет назад

Spreadsheet is in the video description now. Its also here: bit.ly/2ouI5T3

@inoclasism 7 лет назад

you need a logo man. maybe a bush being hit and dropping money.

@BeatTheBush 7 лет назад

I think the same but then I'm not the best graphic design artist. =P

@alenmil 3 года назад

In the formula shouldn't this be ... 1 / ( 1 + r ) ^ n and not (1 - r) ?

@lxnny2357 3 года назад

Why do you use APR instead of interest? I thought APR included the closing costs for the loan.

@tahirimathscienceonlinetea4273 Год назад

Does the APR is changeable at some point in case of refinance because the market is getting better. In the other word lower th rate is possible. IF YES there is any fees for refinance services of lowering rates thanks

@BeatTheBush Год назад

Sometimes, if the rates are low and you refi, you can find a bank that will do it for 'no fee' but the rate might be a tiny bit higher to compensate. So called no fee refi.

@MoonLiteNite 7 лет назад

Should put your spreadsheet on adfly :D more passive income!

@BeatTheBush 7 лет назад

Great idea! I wonder if that will be okay for people.

@BeatTheBush 7 лет назад

Actually, Adfly seems to be great at first but a quick search shows the link posts ads that are often blacklisted or directs to sites that are malicious. Not going to put my viewers through that.

@MoonLiteNite 7 лет назад

BeatTheBush yeah, most of the ads are fake virus warnings and download mangers. It's sketchy

@rileycrain5784 7 лет назад

what is your opinion on a HELOC?

@BeatTheBush 7 лет назад

It's fine but it just means you might have paid too much into your home OR you are spending too much. That said, it can be a great tool to get low interest funds to pay of credit card debts.

@Petrockpress 7 лет назад

can you give thoughts on bitcoin?

@BeatTheBush 7 лет назад

I'll probably do a video on that soon.

@keenanhughes9040 4 года назад

So when he says P times r over 1 minus 1 plus r times n. What does the over mean? Is it times, divide, mutiply?

@juantamad5528 4 года назад

Divide

@bunhoreng9220 4 года назад

In the Mortgage Calc Spreadsheet, column "Total Paid" it is incorrect. It should be equal: "Payment" + "Add' Payment" Isn't it?

@BeatTheBush 4 года назад

=D Thanks!

@azharfahim5184 6 лет назад

Bro its like my finance math lolz.how did u learned that in engineering ???

@BeatTheBush 6 лет назад

They teach exponents in engineering too.

@guccione692 7 лет назад

God! Don't you have loan repayment calculators on each bank webpage in USA? Do you need a link so no crazy calculations by yourself?

@BeatTheBush 7 лет назад

You have but this allows you to see where the calculations come from.

@bolivararguello3773 4 года назад

I feel like you are missing county taxes, HOA, PMI, home insurance which normally is factor in on this equation I've seen.

@BeatTheBush 4 года назад

This is more about the mortgage itself only.

@nadonadia2521 4 месяца назад

error not (1-r) but (1+r)

@mohammedlabeeb 2 года назад

the link for excel sheet is blocked by bitly, any one knows how to get the excel?

@BeatTheBush 2 года назад

Here: www.dropbox.com/scl/fi/13xym89eosxaxe6pm39nh/Mortgage-Calc.xls?dl=0&rlkey=ntsmwzohanhu1rfqww3g0ei65 I'm leaving the long form of the link in there so bitly doesn't block it form now on.

@o.zchaplin8892 4 года назад

Loan amount =$227,568 4% APR 30 years What would the monthly payment be?

@BeatTheBush 4 года назад

Around $1100. Use a mortgage calculator to find the exact amount.

@leobuivulong 6 лет назад

hi bro, i cant download the sheet

@BeatTheBush 6 лет назад

Hum, I just checked, it should work.

@nguyetthu9839 5 лет назад

You need add more tax and insurance.

@amyjacobs9945 5 лет назад

If you would have been my high school algebra teacher I would have passed it with honors.

@BeatTheBush 5 лет назад

=D So I thank my own high school algebra teacher. She was awesome.

@mytravls 5 лет назад

Couldn’t see what’s on the board

@BeatTheBush 5 лет назад

Sorry about my board game.

@jobsucks 3 года назад

360 looks like 310 the way he writes it on the white board.

@xanaaqa417 4 года назад

I'm willing to pay 7mil in payment of 60k a month which I'll complete the 7mil in like 25yrs

@BeatTheBush 4 года назад

Interesting. But didn't understand it too much.

@BandosNBread 7 лет назад

Beat The Bush Am I First?

@BeatTheBush 7 лет назад

Seems like it! =D

@tesfayedejene2798 5 лет назад

It is not clear

@BeatTheBush 5 лет назад

@asmcriminaL 7 лет назад

Bush, there appears to be a mistake. I think you're using the wrong formula. I broke down your formula and I keep getting a negative number. Just by coincidence, I was looking how to do this in excel and there is a formula called PMT. The web page shows the actual formula used. Scroll down to "method 2" www.wikihow.com/Calculate-Mortgage-Payments

@BeatTheBush 7 лет назад

The one I used is a more simplified form. Try dividing the numerator and denominator by (1+r)^n and you will get the formula I used. They are all the same and PMT is just a function that spits out the same result but you cannot see what it's doing.

@asmcriminaL 7 лет назад

This is the input I did in my calculator. I showed the variable values up on top(you'll see what I mean when I show you the picture). My answer is still negative. goo.gl/photos/6Ya9HDHxyCa8j4FGA

@BeatTheBush 7 лет назад

There's an error in the formula! It's not (1-r)^n but should be (1+r)^n. My mistake! Well, it's correct in the excel spreadsheet. =/

@asmcriminaL 7 лет назад

Okay, Thank you. Just add a little bubble annotation stating the error in the formula. No need to redo the entire video ha. I have a question, I am 35(went back to college a bit late). I will graduate next year. I will be a Software Engineer. Starting at around 90k a year. I need to get a house, a decent car, pay off my loan and start saving. I don't even know where to start I know I will need to move to San Jose area. I am not going to be driving 1hr a day to work and back. I also want to knock out my student loan as fast as possible. I also want to start investing... Any recommendations on priorities or where to begin?

@BeatTheBush 7 лет назад

I would live with roommates and get a very modest car. You can then save very quickly to pay off the loans as well as the down payment. Doing matching only will allow you to save up faster but you wont be able to have as large a retirement account.