All Topics / Finance / Newbie question on loans

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  • Profile photo of JimmyBJimmyB
    Member
    @jimmyb
    Join Date: 2003
    Post Count: 2
    December 30, 2003 - 2:54 pm

    Hi all,

    Having recently developed a strong interest in property investment, I have gone out and bought a stack of books on the topic and am slowly going through them all. Steve’s was the first one and that was enough to keep me hooked.

    However, having a strong background in mathematics, I was dismayed to discover that not one of my books contained any information as to how home loans actually work (in all their gory detail), how repayments are calculated, how interest rate rises are applied to existing loans etc.

    While I can aapproximate the mechanisms of loans, I am more interested in getting the info ‘from the horse’s mouth’, so to speak.

    I have searched the web and found nothing. My local bank tells me that they can’t provide the information because they use their systems to do all the calculations.

    Can anybody please recommend a source of information in this regard? Any advice would be appreciated.

    Thanks
    Jimmy

    Profile photo of melbearmelbear
    Member
    @melbear
    Join Date: 2003
    Post Count: 2,429
    December 31, 2003 - 1:11 am

    Jimmy, noting your background in maths, I am guessing that you are good with Microsoft Excel?

    In there, you will find several calculators in the functions that you can use – or in XP, I think there is a template that will do loan repayments over 30 years, plus you can add in additional repayments at various times.

    The calculators are:
    PMT = Principal and Interest Payment
    IPMT = Interest Payment Only
    PPMT = Principal Payment Only

    Cheers
    Mel

    Profile photo of JimmyBJimmyB
    Member
    @jimmyb
    Join Date: 2003
    Post Count: 2
    January 1, 2004 - 6:15 am

    Hi Mel.

    I checked it out and it all looks pretty good.
    Thanks for the tip!

    Jimmy

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763
    January 1, 2004 - 9:16 am

    Hi Jimmy,

    P&I loans are calculated based on the annuity formula where PAYMENT is a variable of PRESENT VALUE (principal or loan balance), INTEREST (per compunding period) and TIME.

    Excel does this with the PMT function.

    Hope this helps.

    Bye,

    Steve McKnight

    **********
    Remember that success comes from doing things differently.
    **********

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

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