Thursday, July 17, 2008

How to Calculate Amortize Loan

When it comes to investing in real estate or buying your first real estate, you will need to start playing with loan. Before taking up any loan, it is important for you to know some basic idea about loan and amortization.

Of course, taking up loan is a must when we are going to invest in real estate. The best thing to do to start taking loan is to learn how to calculate it, how much you would be paying every month, how much money will you spend for the interest and how much money do you need to loan. This post will be on calculating amortize loan, I will discuss other how-to(s) I mentioned just now in the coming posts.

Definitions of Loan and Amortize:

Loan: Borrower borrow money from the lender and agreed to pay back with addition of small sum of cost, which we called interest.

Amortize: Installment, to pay off slowly or gradually usually periodic payments of principal and interest.

Before you take up loan, you can use a formula to calculate how much money you need to pay if the bank charges you certain interest rate.

The formula is as below:

  • PMT = Monthly Payment you need to pay
  • i = Interest rate the bank charges
  • n = 12 months x number of years

You will need a scientific calculator to calculate. Using the formula needs a lot of time in order to get the payment per month for the amortized loan.

If you are lazy, you could use the Amortized Loan Calculator to calculate the payment you need to pay each month.

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