Other Applets
Stocks Valuation
Bonds Valuation
Mortgage
Present Value
Present Value (Uneven CFs)
Future Value
Future Value (Uneven CFs)
Internal Rate of Return
Modified IRR
Net Present Value
Yield to Maturity
PVIF
PVIFA
FVIF
FVIFA
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Mortgage Payments
Sooner or later, most of us will succumb to the "American dream" of owning a home. Yet, the interest rates, as well as high real estate prices in some areas, cause this to be an expensive dream. As the events in recent past has not made things any easier. The crisis in sub prime lending markets costed American dearly in terms of higher mortgage rates. It was common scene in many US states where individuals lost their homes. You will b e surprised to hear most of these sub lenders were from outside U.S. mostly banks in Western Europe. Given a mortgage loan, many homeowners do not realize how the amount of their mortgage loan is calculated. The formula to do so is a variation of computing the present value of annuity is as follows, here we assume that the cash flow begins at the end of terms.
EXAMPLE 1 Mr. Smith pays $100,000 for a new home. A down payment of $30,000 leaves a mortgage of $70,000 with interest compounded at 10.5% per year compounded monthly. Determine the monthly mortgage payment if the loan is to be repaid over 20 years
Using
MS Excel to compute Mortgage Payment
Calculates the payment for a loan based on
constant payments and a constant interest rate. Syntax PMT(rate,nper,pv,fv,type) For a more complete description of the
arguments in PMT, see PV. Rate is the interest rate for
the loan. Nper is the total number of
payments for the loan. Pv is the present value, or
the total amount that a series of future payments is
worth now; also known as the principal. Fv is the future value, or a
cash balance you want to attain after the last payment
is made. If fv is omitted, it is assumed to be 0 (zero),
that is, the future value of a loan is 0. Type is the number 0 (zero)
or 1 and indicates when payments are due.
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