Amortization Formulas
An interest bearing debt is amortized if principal P dollars and interest I dollars are paid over a term of t years at regular payments of p dollars every (1/n)th of a year. Monthly payment and total interest are defined as:
Example:
A couple makes a down payment of $10,000 down on the purchase of a new home. The bank finances a mortgage of $400,000 at 6.5% over a term of 30 years. The loan requires monthly payments due on the first of every month. Determine approximate monthly payment, in addition to total interest paid over the life of the loan.
