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Ok, so you’re at a cocktail party and want to look cool. You edge up to the group talking about the big game last weekend, hardly able to contain your enthusiasm, and blurt out, “Wanna learn how to calculate your mortgage payment, LONG HAND!!!!” After a few moments of staring at you quietly, the group (of meatheads) looks away and returns to their previous conversation. Fortunately, an unsuspectign victim is on the couch eating cocktail weenies and seems very interested in your newfound skill. Later, he shares with you that he has recently discovered a herd of unicorns in the nearby enchanted forest. Go ahead, try this at your next big social gathering – you’ll have the group gathered around to bask in your amazing intelligence!

Hey it’s philip seagraves if you’re like me you’ll be at a cocktail party somebody will be talking about the final four you’ll walk up and say yeah man the hulk man i love the whole hulk’s awesome they give you that look like dude we’re talking about basketball like oh yeah yeah i knew that well hey i can calculate a mortgage payment and they look at you and say oh

Yeah that’s oh that’s awesome so i just want to make sure that you guys have some of these same skills so we feared a cocktail party and you want to whip out and just impress your friends and be able to calculate the mortgage payment form that you can do it to so and mostly by longhand we’ve calculated for one part but this is how you do it all right so let’s grab

The notebook and we’ll just get working at it all right first thing that you’ve got to remember is just the basic formula for calculating a payment mortgage payment so that basic formula is always going to be payment equals the balance times the rate and that’s going to be all divided by one minus one over one plus the rate and then we’re going to raise that to

The power of how many periods of jaglom so there’s your basic formula it’s a balanced time the rate divided by one minus one over one plus the rate to the end well one of these numbers that we’re talking about let’s say we have a hundred thousand dollar mortgage balance equals a hundred thousand and then we have a rate i’m going to make this simple on myself let’s

Say it’s twelve percent that’s twelve percent annual rate of interest on your mortgage and let’s say that in it’s a regular 30-year mortgage so we have thirty years all right well but these are monthly payments so we’ve got to translate these guys into a into monthly so this is going to be easy so that’s going to be one percent is our monthly and on our number of

Total payments total monthly payments that’s going to be 360 because that’s 30 times 12 years is going to give us 360 payments so now let’s just lay out this problem so our payment is going to equal a hundred thousand dollars times our rate this is 0.01 we’re going to divide that by one minus one over one plus now remember our rate again was this point o one and

We’re going to raise that all to 360th power now obviously i can’t do 360 raise something to three and 60th power in my head or anything like that so we’ll just use the calculator to do that really quickly and of course this is like a cooking show on tv i’ve already done that so let’s rewrite this out with what we know now payment equals a hundred thousand dollars

Times 0.01 which we know a hundred thousand times 0.01 is just going to be a thousand dollars i can do that in your head and that is going to be now we’re going to 1 minus 1 over and this 1.01 to the 360th power is 35.94 okay so now we’re just going to calculate this fraction here and that comes out to about 0.02 79 so 1 over 35.94 is about 1.0 7/9 we have 1,000

Divided by 1 minus 0.02 7 9 and that’s going to come to when we solve this out it’s going to come to about minus 102 eight point six one so what we’ve done now is we’ve set our payment is equal to we just follow the math down we get to our payment equals 1028 dollars and 61 cents now i tell you what there’s nothing more impressive at a cocktail party than being

Able to walk somebody through that math and tell them that you can figure out what their mortgage payment is without using a financial calculator without using excel just by doing it the old-fashioned way longhand by using this awesome formula right there so school children can do this i know you can’t – have a great day

Transcribed from video

Mortgage Payment – Long Hand By SpaceOverTime