Help contents

Contents for Mortgage Math Help

   Mortgage Math is a calculator that can help you estimate mortgage payments, length of time until payoff, equity over time.  And you can view or print-out an entire payment schedule.

How To...

   Get Started

   Calculate How Long Until Payoff

   Calculate Equity Over Time

   View a Payment Schedule

   Print Out a Payment Schedule

Definitions...

   Principal

   Interest

   Payment

   Equity

   Payoff

A Message About Your Children


Getting started

Getting Started with Mortgage Math

   You should first copy "VBRUN300.DLL" to your Windows\System directory.  Then from File Manager, create a new working directory for Mortgage Math.  Into this directory you should copy "MORTGAGE.EXE" and "MORTGAGE.HLP".  Once all of these files have been copied, the program will be ready to go.

   When you double click on the Mortgage Math icon, the main calculator window will appear.  You will see 3 text input areas on the top half of the window.  Each of these areas must contain data in order to make calculations.

   One fast and easy way to use the calculator is to start by clicking on the Example button.  A random set of data will be automatically entered and calculated.  Then you can make adjustments to the data to suit your needs.  You should experiment with different values to see the wide range of possibilities.


Calculating time until payoff

Calculating The Time Until Payoff

   Once you have data entered into the Pricipal, Interest, and Payment fields on the top half of the calculator window, you can click on the Calculate button that corresponds to Payoff, and messages will appear showing the number of years and months required to pay off that particular loan.  Also shown will be the total dollar amount paid by the end of the loan term.  If your input data is not within reasonable parameters, you may get an error message.

   To shorten the length of the loan, change to a higher monthly payment amount.  Small changes in payments can make a big difference in the amount of time it takes to pay off a mortgage, and in the total amount paid over time.

   To lengthen the term of the loan, change to a lower monthly payment.


Calculating equity over time

Calculating The Equity Over Time

   Once you have made a payoff calculation, you can check to see how much of your monthly payments have gone toward the equity of your home.

...Before making the Equity calculation, select the number of years from the drop-down list box to the right of the Calculate...Equity command button.  The range is from 1 year to the number of years in the loan.

   Now, when you click on the Calculate button that corresponds to Equity, messages will appear showing the amount of equity after the number of years that you have specified.  Also shown is the total of all your monthly payments after this time.

(Hint:  You can find the total amount of interest paid by subtracting the equity from the total amount paid after the specified number of years.)


Viewing a Payment Schedule

   Once you have performed calculations, you may want to see a complete payment schedule based on those calculations.  These schedules can be several pages in length, so It may be helpful to preview this information before making a print-out.

   To show the payment schedule preview window, choose View Payment Schedule from the file menu.

   The payment schedule preview shows the portion of each months payment that is interest, the remaining amount that is applied toward principal, and the total of all principal paid over time.


Printing a payment schedule

Printing Out a Payment Schedule

   Once you have performed calculations, you may want to make a print-out that shows complete payment information for each month during the term of the mortgage loan.

   When you select Print from the File menu, this report will be generated on your default printer.  It will show the following information:

Payment #          Interest          Principal          Equity to date

The Payment # is the number of months since the loan originated.

The Interest is that portion of the monthly payment that goes toward interest

The Principal is that portion of the monthly payment going toward your equity

The Equity to date is the total amount of principal paid after that payment.

   Before printing, you should be aware that these reports are several pages long and can take a long time to print, depending on your printer's capabilities, so you may want to preview the payment schedule before printing.


Invalid Range Error

   You may from time to time get a message that says "Your children may not live long enough to pay this one off!"

   This indicates that the monthly payment is so low, that there is not enough money in that payment to cover the monthly interest amount.  Which means that the loan will NEVER be paid off (or at least within 75 years or so).

   To correct this error, you can either set a higher monthly payment, or you can use a lower interest rate.  (Usually, a higher payment will make a bigger difference than a lower interest rate.)


Principal Defined

   For the purpose of this application, the principal refers to the purchase price of a home or property after the downpayment has been made.  This is the amount that you are borrowing.

   Most home purchases will require some downpayment.  The more you put down, the better it is for you.  You will qualify easier, your interest rate will probably be lower, and you can choose a shorter term mortgage.

   If you don't know how much downpayment will be required, you assume that it will be at least 5% of the purchase price, and you should deduct this amount from the purchase price before entering the principal amount.


Interest Defined

   For the purpose of this application, the interest refers to a fixed percentage.  If you are considering a variable rate mortgage loan, you should specify a higher-than-average fixed rate in this application, to account for the possibility of the interest rate increasing over the length of the loan.  Don't worry too much about the interest rate going down over time!!

   The range of interest rates available for use in Mortgage Math are from 5.00% to 11.75%, in increments of 1/4 percentage point.  Market rates fluctuate daily and are frequently quoted in 1/8 percentage point increments.  This smaller increment will not have a great affect on your calculations.


Payment Defined

   For the purpose of this application, the payment refers to a fixed monthly amount paid for interest and principal.  This is the amount that you will have to write a check for each month.

   It is assumed that the interest rate remains unchanged throughout the term of the loan, and that there are no adjustments for escrowed amounts.  If you will be required to pay each month for insurance and/or property taxes, then you must add the amount to your monthly payments after making the calculations using Mortgage Math:

Monthly Escrow = ((Annual Property Tax + Annual Insurance) / 12)

Monthly Payment = (Monthly Payment + Monthly Escrow)


Equity Defined

   For the purpose of this application, equity refers to the total amounts of your monthly payments that have been applied to the principal of the loan.

...This differs from the general definition of equity which reflects the changes in the market value of your home and property.  Over time, the value of your property is likely to increase, and so your equity will normally increase faster than the total principal paid.

...It is better NOT to assume that there will be increases in property values.  Sometimes they go down, and you should consider choosing the location of your property very carefully!


Payoff Defined

   For the purpose of this application, payoff refers to approximate number of years and months that it will take to payback 100% of the principal of your mortgage loan.

   Common lengths of mortgage loans range from 15 to 30 years.  Use Mortgage Math to study the dollar amounts involved in the different terms.

You should choose a mortgage loan with the shortest possible term that you can afford.  Sometimes it is a good idea to start out with monthly payments that are HIGHER than you can afford.  Then, over time, you will likely make more and more money each year, and it will get easier.