# Formula for calculating the mortgage repayment?

Deal Score0

Could some one give me the formula for calulating the mortgage repayment figure. Consider the following example for calulation.
Suppose the Principal is \$ 250,000 ( borrowed money )
Interest is 8.00%
Time for loan repayment is 20 years
Frequency of repayment is monthly
So what will be the repayment amount = …………/ month????
I know now a days with the help of software I can just put the above figure in the respective columns and I will get the result within a second but I want to know the calculating formula so that I can calculate myself.

I am researching the topic for a project at school. I thought with the dawning of the computer age, repayment of the loan would be feasible via the internet. But is the process legal? And would any Japanese bank agree to it?

mldjay
February 11, 2011 at 8:08 pm

I use this calculator: http://ray.met.fsu.edu/~bret/amortize.html

You can use it on any loan/credit card you are paying back. You can also see the amortization table to see how much is going towards principle & interest.

Answer from the above calculator is: 2091.10/month

Alexander K
February 11, 2011 at 8:16 pm

I have been a loan officer for many years now, yet never found the formula, I think it’s a little more complicated than you think. what I personally use is spreadsheets. This is the formula you put into Excell to get the payment:
=PMT(8%/12,240,250000,0,0)

where 8%/12 – is monthly interest
240 -number of months to repay
250000 – present balance
0 – future balance
0 – type of loan (this can be ommited, I think it only matters for some type of Canadian loans)

It returns negative value for payment as 2091.10
Payments are always negative values on Excell, so you can add a minus sign to reverse it
-=PMT(8%/12,240,250000,0,0)

Joe L
February 11, 2011 at 9:09 pm

((interest rate/100)/12) * Amount borrowed) / (1-((interest rate/100)/12))(-number of monthly payments)

arpit88u
February 11, 2011 at 10:01 pm

it’s P = principal value
i = interest annual
T = time in years
M = monthly payment

M = (P) * [ { ( i ) / (12*100) } / { 1 – ( 1 + ( i ) / (12*100)) ^ (-12 * T) } ]…

hope it helps…