So in the numerator and the top of this fraction, we've got our friend.

So this are it's actually gonna show up several times.

This are is actually the interest rate that you're paying.

So the A PR the annual interest rate.

We have to divide that by 12.

Why?

Because we're making monthly payments.

So we take our we check the interest rate divide by 12.

Think that are we multiply it by one plus R to the n wth power. 00:00:54.660 --> 00:01:3.440 That end is an exponents right now that and also represents something that is the number of payments that you're going to be making. 00:01:3.450 --> 00:01:7.620 So, for a 30 year loan, there's 12 months in a year. 00:01:7.620 --> 00:01:15.020 And if you make a payment every year, they're gonna They're gonna have 30 years times 12 right?

12 months in a year.

30 years.

That's gonna tell you how many payments you have two makes.

That would be 360 right?

If you were doing a 30 year loan, write if you're doing a 15 year loan to be 30 or excuse me 15 times 12 would be 100 and 80 and then a denominator just have that one plus R to the end power, and then we subtract one.

So if we follow this this formula here, that's going to yield our monthly mortgage payment, right?

And now, when I'm were not kind of simplify things, we're not gonna think about property taxes.

There are things that might be lumped in with the mortgage payment. 00:01:53.880 --> 00:02:1.640 We're just gonna think about repaying the principal in the interest for right now just so you can get a feel for how that you'll go about calculating this for a mortgage. 00:02:2.020 --> 00:02:17.950 So let's say that you borrow $100,000 at 6.5% a PR right to be repaid over 30 years, So you've got a 30 year mortgage right now, we want to say what would be the monthly payment.

We want to calculate the monthly payment.

So we know how much to pay the lender each month.

So our monthly payment may just change color.

So our monthly payment gonna be equal to our principal.

All right, Our principal is $100,000.

That's how much money were borrowing.

And now we're gonna multiply that by this fraction above right.

But we need to know what our is.

So let me take him.

We'll try and keep the same colors, so we're gonna have 0.65 divided by 12. 00:02:58.030 --> 00:03:6.160 That's our our If you remember, our interest rate divided by 12 Now, this number, we can just put it. 00:03:6.160 --> 00:03:8.750 I'm just gonna put it in here so you can see it and so forth. 00:03:8.950 --> 00:03:10.520 But really want No, it comes out.

I'll just round it.

0.5 417 That's rounded, but I'm just gonna leave it in here like this, right?

So you can see, Then we add or excuse me, multiply by one plus are which is 0.65 over 12.

And then we raise that to the nth power.

Right?

And the power.

Since it's a 30 year mortgage, there's going to be we're gonna have 30 times 12 360 payments.

All right, so this is gonna be to the 360 ifthe power.

Okay, Now, in our denominator, the bottom part of our fraction change colors. 00:03:53.150 --> 00:04:6.250 Here again, we're gonna have one plus point hope 0.65 divided by 12 to the 360. 00:04:6.250 --> 00:04:8.350 Ifthe power, that's that and again. 00:04:9.140 --> 00:04:11.930 And then we're going to subtract one, right?

So you can put this into excel.

Or if you have a graphing calculator, you'll be able to put it in, and you just take the 100,000 and then you multiply it by this big fraction right here.

Okay, that is going to yield.

Believe we're gonna have a monthly payment of $632.

Or should I write this here?

We'll put this and white again.

So we have a monthly payment of $632.

That's gonna be our monthly mortgage payment.

And again, just just a note here.

You're paying this in a monthly basis, but there might be other things. 00:04:53.640 --> 00:05:1.030 Write such as property tax, homeowner's insurance that the lender decides. 00:05:1.030 --> 00:05:1.340 You know what? 00:05:1.340 --> 00:05:6.400 We're gonna put that we're gonna put it, that in this part of the loan that's part of your mortgage payment. 00:05:6.400 --> 00:05:7.290 We're not getting into that. 00:05:7.290 --> 00:05:14.110 Here were just talking about repaying this principle along with this 6.5% interest over a 30 year term.

And to do that, you'd pay $632 a month for 30 years.