Sunday, October 18, 2015

How is mortgage monthly payment calculated?

Starting with a loan and annual interest rate , let’s list the amounts of debt we owe the bank for each month.

To simplify the formulas, let’s write , this is the rate at which your is increasing monthly. And is the monthly payment you are supposed to make to the bank.

Month Debt

At the nth monthly your debt should be cleared, so, setting it to 0 we get: