mortgage interest

  • Thread starter Thread starter Tracy
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Tracy

Hi, What is the correct excel formula to calculate the monthly interest on
an interest only mortgage of £100,000 at a rate of 3.75% per year where the
interest is calculated daily?
At present I use

=((C22*C19)/12)

where C22 is £100,000 and C19 is 3.75% but the result is not the same as
what I am being charged each month.
Thanks, Tracy
 
Hi Tracy,

In part, the answer depends on how fequently interest is charged. Although it might be calculated daily, it might only be charged
monthly. Plus, some financial institutions calculate the daily & monthly interest on the basis of a year having 12 30-day months, so
interest for a 365 or 366 day year is calculated as if there were only 360 days (30 per month, even for February).
 
Hi,

=C22*((1+C19/366)^30)-C22 (for a 30-day month in 2008, a leap year)

(for a 31-day month, change the "30" to 31. For a non-leap year, change the
"366" to 365)

Regards,
Ramachandran
 
What is the correct excel formula to calculate the monthly interest
on an interest only mortgage of £100,000 at a rate of 3.75% per
year where the interest is calculated daily? At present I use
=((C22*C19)/12)
where C22 is £100,000 and C19 is 3.75% but the result is not
the same as what I am being charged each month.
Click to expand...

The answer might depend on the terms of your loan and the customs of
your jurisdiction (UK?). You have the correct formula for the
"typical" interest-only loan.

It would help us help you if you provided the amount you are actually
being charged. Otherwise we are just making wild-ass guesses about
the terms of the loan.

Some other questions to answer:

1. Is this a fixed-rate or variable-rate loan (specify which)?

2. Is the amount "charged each month" constant or variable (specify
which)?

3. Did the lender specify another rate -- usually called the effective
rate or APR -- which is based solely on the terms of the amortized
loan (i.e. principal, interest rate, loan term, calculation frequency)
excluding any up-front fees and payments?

4. Does your loan contract explain how the monthly payment is
calculated?
 
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