Loan Amortization | Calculating Monthly Mortgage Payments Using PV of Annuity Formula

[@variablex6928]

Extremely clear explanations.

[@variablex6928]

Your channel is under-watched. More students need to watch these videos for simple and clear explanations on what seems like a 'tough' topic.

[@professorikram]

That's very kind of you to say. Thank you! Feel free to reach out to me if there are specific finance topics you'd like to see videos on.

[@yongyanli9091]

In the question, it said the mortgage rate is compounded monthly, so I think you miss the step of converting APR into EAR.

[@professorikram]

Hi Yongyan. Be careful. You would Only convert the APR into an EAR if the payments were to be made annually. In this case, both the compounding and the payments are being done monthly, so there is no need to convert APR into EAR.

[@yongyanli9091]

I get it now :) Thank you for the explanation

[@crispylemon]

If I want to know how much I still owe at maybe Year 19, am I finding the present value?

[@professorikram]

Yes that’s correct. You can figure out how many more months of the same payment are remaining, and calculate their present value. I have a separate video on “Balloon Payments” that explains that very idea and also shows how you can do that using Excel: kzbin.info/www/bejne/a2HUnYt_mt91gs0si=pE7K1WlhJP1jSYPF