19 Feb

A mortgage is a loan secured from a bank or a financial institution to purchase or build property. Mortgage payments can be calculated using a mortgage calculator or they can be calculated manually.

**Manual Calculation**

Calculating your mortgage payment is a task that requires time and concentration. It should be done more than once to ensure you are accurate. Here are the basic steps to guide you as you calculate your mortgage payments:

1. Collect the relevant information you need. This includes the interest rate, the amount secured as a loan for the mortgage and the period you have to pay the mortgage. Multiply the home’s purchase price with the percentage of the value, which you intend to finance with a mortgage. For example if the value of the house is $937,500 and you plan to finance 80 percent of that amount with a mortgage multiply $937,500 with 0.8 to get a $750,000 loan.

2. Based on the amount of time given to repay the loan you can establish how much you ought to pay per month. For example if the amount of time allocated to repay the loan is 20 years then you should divide your mortgage into 240 payments. You simply multiply the number of years with 12, the number of months in a year.

3. The third step is calculating the interest per month. This is important to determine how much interest you should add to the amount you have already allocated to pay for each month. To calculate the interest per month, you divide the interest rate by 12 months. For example, if the interest rate is 6 percent you divide this by 12, which equals to 0.005 monthly rates.

4. Then use the following formula to calculate. [R/(((1+R)^M)01)]*[1+R^M]*L. R represents the rate of monthly interest, L is the loan amount and M represents the number of monthly payments to be made. For the example used, the formula should look like this [0.005/ (((1+0.005) ^240-1)]*[1+0.005) ^240]*$750,000.

5. Use the formula replacing the letters in the formula with the actual numbers you have.

**Mortgage Calculator**

The second option is that of using a mortgage calculator. A mortgage is easier to use and faster than calculating manually. The mortgage calculator is readily available and easy to use. A mortgage calculator is an online form you fill in details about your finances. The form may ask for details such as the cost of the property you wish to purchase, your income, how much deposit you can give and the length of time you wish to repay your mortgage.

The calculator is more accurate and faster than manual calculation. You can also use the calculator to find out how much deposit you need to save, the kind of monthly payments you can afford on your salary and the overall cost of the purchase.

You can choose to manually calculate your mortgage payments or to use a mortgage calculator. You can also choose to use both. This will increase the accuracy of your calculation to avoid any unforeseen costs.

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October 30, 2014

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