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Excel Mortgage Payment Formula

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The task at hand…

In Excel it is possible to calculate monthly repayments on a mortgage by using the PMT function.

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The PMT function has the following arguments:

Rate – this is interest rate on the mortgage loan divided by 12

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The PMT function has the following arguments:

Nper – this is the term of the mortgage or the number of monthly repayments you will make. For example with a 25 year mortgage you would make 12 multipled by 25 monthly repayments.

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The PMT function has the following arguments:

PV (present value) - is the mortgage amount – the amount you have borrowed, expressed as a negative value.

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The PMT function has the following arguments:

FV - you can leave blank. FV stands for future value. As the future of the loan when it has be repaid will be zero and zero is the default for this argument it can be left empty.

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The PMT function has the following arguments:

Type – here you state whether you will make the payment at the beginning or at the end of each month, type 1 if at the beginning or 0 if at the end. Sorry no option for halfway through the month.

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Our Example

An example. John takes out a £250,000 mortgage over 25 years with an annual interest rate of 4.5%. He will make his mortgage payment on the 1st of each month.

Rate would be 4.5%/12Nper would be 25*12PV would be -250000Type would be 1

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Our Example

To practice this example in Excel, in a blank spreadsheet enter the following data starting in A1.

i) Rate goes in A1, 4.5% goes in B1 and so on for each row.Rate 4.5%Term 25Mortgage 250000Repayment

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Our Example

To practice this example in Excel, in a blank spreadsheet enter the following data starting in A1.

i) Rate goes in A1, 4.5% goes in B1 and so on for each row.Rate 4.5%Term 25Mortgage 250000Repayment

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Our Example

ii) Click into cell B4 – this is where we will calculate the monthly repayment

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Our Example

iii) Now click on the fx button on the Excel formula bar just above the spreadsheet’s column headers. This will open the Insert Function dialogue box. In the search box type PMT and then click Go. Select PMT from the results list below and then click OK

In the Rate box type B1/12In the Nper box type B2*12In the Pv box type –B3 Leave the FV box emptyIn the Type box type 1

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Our Example

iv) Click OK Your answer should be 1384.39

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More Excel Tutorials

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