10-15-2009, 10:24 PM
I have a university degree in math and worked with calculations involving interest all my life and I could never match the bank's figures on my mortgages. 
So I figure that someone with less education in that field (an anthropologist, a brain surgeon, a mechanic) may have even less idea what's going on. They take advice from someone who seems to know more.
That said, a quick way to approximate your mortgage payments: Take the quoted interest rate and divide by 12. Multiply the principal by this number and add $10. This gives your monthly payment. It should be accurate for the first 2 digits, maybe the third. The $10 represents the amount of principal you pay off in the first month. It also represents how much you pay off in each of the next 11 months.
If your interest rate changes (if they'll tell you how much), repeat the calculation using the new rate. If the amount calculated is more than you're paying the bank, you're owing more each month than you did the month before.
If you have a variable rate mortgage, it's more complicated.
This is a good approximation for 20 year or longer amortization periods. If someone offers you a period over 25 years, compare with a 25 year period -- there won't be much difference in monthly payments. If you can afford it, ask them to move your payments up -- add $20 or round to the next hundred. It will cut down how long you have to pay.
So I figure that someone with less education in that field (an anthropologist, a brain surgeon, a mechanic) may have even less idea what's going on. They take advice from someone who seems to know more.That said, a quick way to approximate your mortgage payments: Take the quoted interest rate and divide by 12. Multiply the principal by this number and add $10. This gives your monthly payment. It should be accurate for the first 2 digits, maybe the third. The $10 represents the amount of principal you pay off in the first month. It also represents how much you pay off in each of the next 11 months.
If your interest rate changes (if they'll tell you how much), repeat the calculation using the new rate. If the amount calculated is more than you're paying the bank, you're owing more each month than you did the month before.
If you have a variable rate mortgage, it's more complicated.
This is a good approximation for 20 year or longer amortization periods. If someone offers you a period over 25 years, compare with a 25 year period -- there won't be much difference in monthly payments. If you can afford it, ask them to move your payments up -- add $20 or round to the next hundred. It will cut down how long you have to pay.
David
Moderato ma non troppo
Perth & Exeter Railway Company
Esquesing & Chinguacousy Radial Railway
In model railroading, there are between six and two hundred ways of performing a given task.
Most modellers can get two of them to work.
Moderato ma non troppo
Perth & Exeter Railway Company
Esquesing & Chinguacousy Radial Railway
In model railroading, there are between six and two hundred ways of performing a given task.
Most modellers can get two of them to work.