Question

Assume that an investor has shs. 500,000 and wants to invest this amount in the variable rate payment mortgage at 5.5% original interest rate, with a 30 year term and monthly payments. In the contract the interest is meant to be adjusted upwards at the end of each year at the rate of 0.5% per year. Calculate the monthly payments for the 1st - 4th years of the loan.

Answer 1

Annual Amortization Schedule

	Beginning Balance	Interest	Principal	Ending Balance
1	$500,000.00	$2,464.55	$15,486.85	$484,513.17
2	$484,513.17	$2,386.92	$15,564.48	$468,948.73
3	$468,948.73	$2,308.93	$15,642.47	$453,306.29
4	$453,306.29	$2,230.53	$15,720.87	$437,585.45

	Date	Beginning Balance	Interest	Principal	Ending Balance
1	7/2019	$240,000.00	$772.00	$354.51	$239,645.49
2	8/2019	$239,645.49	$770.86	$355.65	$239,289.84
3	9/2019	$239,289.84	$769.72	$356.79	$238,933.04
4	10/2019	$238,933.04	$768.57	$357.94	$238,575.10
5	11/2019	$238,575.10	$767.42	$359.09	$238,216.01
6	12/2019	$238,216.01	$766.26	$360.25	$237,855.76
7	1/2020	$237,855.76	$765.10	$361.41	$237,494.35
8	2/2020	$237,494.35	$763.94	$362.57	$237,131.78
9	3/2020	$237,131.78	$762.77	$363.74	$236,768.04
10	4/2020	$236,768.04	$761.60	$364.91	$236,403.13
11	5/2020	$236,403.13	$760.43	$366.08	$236,037.05
12	6/2020	$236,037.05	$759.25	$367.26	$235,669.79
year 1 end
13	7/2020	$235,669.79	$758.07	$368.44	$235,301.36
14	8/2020	$235,301.36	$756.89	$369.62	$234,931.73
15	9/2020	$234,931.73	$755.70	$370.81	$234,560.92
16	10/2020	$234,560.92	$754.50	$372.01	$234,188.91
17	11/2020	$234,188.91	$753.31	$373.20	$233,815.71
18	12/2020	$233,815.71	$752.11	$374.40	$233,441.30
19	1/2021	$233,441.30	$750.90	$375.61	$233,065.70
20	2/2021	$233,065.70	$749.69	$376.82	$232,688.88
21	3/2021	$232,688.88	$748.48	$378.03	$232,310.85
22	4/2021	$232,310.85	$747.27	$379.24	$231,931.61
23	5/2021	$231,931.61	$746.05	$380.46	$231,551.14
24	6/2021	$231,551.14	$744.82	$381.69	$231,169.45
year 2 end
25	7/2021	$231,169.45	$743.60	$382.91	$230,786.54
26	8/2021	$230,786.54	$742.36	$384.15	$230,402.39
27	9/2021	$230,402.39	$741.13	$385.38	$230,017.01
28	10/2021	$230,017.01	$739.89	$386.62	$229,630.39
29	11/2021	$229,630.39	$738.64	$387.87	$229,242.52
30	12/2021	$229,242.52	$737.40	$389.11	$228,853.41
31	1/2022	$228,853.41	$736.15	$390.36	$228,463.04
32	2/2022	$228,463.04	$734.89	$391.62	$228,071.42
33	3/2022	$228,071.42	$733.63	$392.88	$227,678.54
34	4/2022	$227,678.54	$732.37	$394.14	$227,284.39
35	5/2022	$227,284.39	$731.10	$395.41	$226,888.98
36	6/2022	$226,888.98	$729.83	$396.68	$226,492.30
year 3 end
37	7/2022	$226,492.30	$728.55	$397.96	$226,094.33
38	8/2022	$226,094.33	$727.27	$399.24	$225,695.09
39	9/2022	$225,695.09	$725.99	$400.52	$225,294.57
40	10/2022	$225,294.57	$724.70	$401.81	$224,892.76
41	11/2022	$224,892.76	$723.41	$403.10	$224,489.65
42	12/2022	$224,489.65	$722.11	$404.40	$224,085.25
43	1/2023	$224,085.25	$720.81	$405.70	$223,679.54
44	2/2023	$223,679.54	$719.50	$407.01	$223,272.54
45	3/2023	$223,272.54	$718.19	$408.32	$222,864.22
46	4/2023	$222,864.22	$716.88	$409.63	$222,454.59
47	5/2023	$222,454.59	$715.56	$410.95	$222,043.64
48	6/2023	$222,043.64	$714.24	$412.27	$221,631.37
year 4 end
49	7/2023	$221,631.37	$712.91	$413.60	$221,217.77
50	8/2023	$221,217.77	$711.58	$414.93	$220,802.85
51	9/2023	$220,802.85	$710.25	$416.26	$220,386.58
52	10/2023	$220,386.58	$708.91	$417.60	$219,968.98
53	11/2023	$219,968.98	$707.57	$418.94	$219,550.04
54	12/2023	$219,550.04	$706.22	$420.29	$219,129.75
55	1/2024	$219,129.75	$704.87	$421.64	$218,708.10
56	2/2024	$218,708.10	$703.51	$423.00	$218,285.10
57	3/2024	$218,285.10	$702.15	$424.36	$217,860.74
58	4/2024	$217,860.74	$700.79	$425.72	$217,435.02
59	5/2024	$217,435.02	$699.42	$427.09	$217,007.92
60	6/2024	$217,007.92	$698.04	$428.47	$216,579.46

Loans can be customized accordingly based on individual borrowing preferences, but the number of available options can be overwhelming. Two of the most common deciding factors are the term and monthly payment amount, which are separated by tabs in the calculator.

Fixed Term

Mortgages, auto, and many other loans tend to use the time limit approach to the repayment of loans. For mortgages in particular, choosing to have routine monthly payments between 30 years or 15 years or other terms can be a very important decision, because how long a debt obligation lasts can affect a person's long-term financial goals. Some examples include:

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Fixed Monthly Payment Amount

This method helps determine the time required to pay off a loan, and is often used to find how fast the debt on a credit card can be repaid. This calculator can also estimate how early a person who has some extra money at the end of each month can pay off their loan. Simply add the extra into the "Monthly Pay" section of the calculator.

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Interest Rate (APR)

When using a figure for this input, it is important to make the distinction between interest rate and annual percentage rate (APR). Especially when very large loans are involved, such as mortgages, the difference can be up to thousands of dollars. By definition, the interest rate is simply the cost of borrowing the principal loan amount. On the other hand, APR is a broader measure of the cost of a loan, and rolls in other costs such as broker fees, discount points, closing costs, and administrative fees. In other words, instead of upfront payments, these additional costs are added onto the cost of borrowing the loan, and prorated over the life of the loan instead. If there are no fees associated with a loan, then the interest rate equals the APR. For more information about or to do calculations involving APR or Interest Rate, please visit the APR Calculator or Interest Rate Calculator.

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Variable vs. Fixed

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Variable Rate Information

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