Mortgage Formula For Excel

Mortgage Formula for Excel: Simplifying Your Home Loan Calculations

If you’re planning to take out a mortgage for your dream home, you need to have a clear understanding of your monthly payments. Calculating your mortgage payments can be a daunting task, especially if you’re not familiar with the formula. Fortunately, Microsoft Excel has a built-in mortgage calculator that can help you simplify the process. In this article, we’ll explore the mortgage formula for Excel and how you can use it to calculate your home loan payments accurately.

Understanding the Mortgage Formula

Before we dive into the mortgage formula for Excel, let’s first understand the basic components of a mortgage payment. A mortgage payment is typically composed of four parts: principal, interest, taxes, and insurance. The principal is the amount of money you borrowed, while the interest is the cost of borrowing that money. Taxes and insurance are additional costs that may be included in your monthly payment, depending on your lender and location.

The mortgage formula for Excel uses the following equation to calculate your monthly payment:

=PMT(rate, nper, pv, [fv], [type])

• Rate: The interest rate per period. This should be divided by 12 for monthly payments.
• Nper: The total number of payments for the loan.
• Pv: The present value, or the total amount of the loan.
• Fv: The future value, or the balance remaining after the final payment. This is optional and can be left blank.
• Type: The timing of payments. 0 for the end of the period, and 1 for the beginning of the period. This is optional and can be left blank.

Using the Mortgage Formula in Excel

Now that you understand the components of the mortgage formula, let’s see how you can use it in Excel. Here’s a step-by-step guide:

1. Open a new Excel spreadsheet and create a table with the following columns: Payment Number, Payment, Principal, Interest, Taxes, Insurance, and Balance.
2. In the Payment Number column, enter the number of each payment, starting from 1.
3. In the Principal column, enter the total amount of the loan.
4. In the Interest column, enter the interest rate per period, divided by 12.
5. In the Taxes and Insurance columns, enter the additional costs, if any.
6. In the Balance column, enter the formula =PV(interest rate per period, total number of payments, monthly payment).
7. In the Payment column, enter the formula =PMT(interest rate per period, total number of payments, total amount of the loan).
8. Copy the formulas in the Payment, Principal, Interest, Taxes, Insurance, and Balance columns to the rest of the rows in the table.

Example:

Suppose you want to take out a $200,000 mortgage with an interest rate of 4% per year, payable over 30 years. Using the mortgage formula for Excel, you can calculate your monthly payment as follows:

=PMT(4%/12, 30*12, $200,000)

This gives you a monthly payment of $954.83. You can then use this result to create a table that shows your monthly payments, principal, interest, taxes, insurance, and balance for each payment.

The Benefits of Using Excel for Mortgage Calculations

Using Excel to calculate your mortgage payments has several advantages. First, it saves you time and effort compared to manual calculations. With Excel, you can easily create a table that shows your payments, principal, interest, taxes, insurance, and balance for each payment. You can also modify the inputs, such as the interest rate or loan amount, and see how they affect your monthly payment.

Second, Excel provides you with a clear and organized way to track your mortgage payments. By creating a table, you can see how much of each payment goes towards principal, interest, taxes, and insurance. You can also see how much you still owe on the loan at any given time.

Finally, using Excel for mortgage calculations gives you more control over your finances. By understanding how your monthly payment is calculated, you can make informed decisions about your budget and savings. You can also compare different loan options and see which one is the most affordable for you.

Conclusion

Calculating your mortgage payments can be a challenging task, but with the mortgage formula for Excel, it doesn’t have to be. By using Excel, you can simplify the process and create a clear and organized table that shows your payments, principal, interest, taxes, insurance, and balance for each payment. Whether you’re a first-time homebuyer or a seasoned homeowner, using Excel for mortgage calculations can help you make informed decisions about your finances and achieve your homeownership goals.