This means that the Interest does not earn any extra interest on itself, it is simply generated one time only.

And if Luke invests $2000 at 3% Interest per annum for three years, then the Principal is P = 2000.

If you have a lot of borrowed money, like for a housing mortgage, then even a small change in Interest Rate will cause a significant financial burden.

This happens because a small percent like 0.5%, of a big number like a mortgage for $400 000 will require the owner to pay an extra $2000 Interest in the next 12 months. However it is very important to realise how this Rate multiplied by the Time in the I = PRT formula leads to much higher than expected sums of money being involved. The Total Amount Roxanna has to repay is all of the $5550 Interest, plus the original $6000. Excel Spreadsheets with the I = PRT formula written into them can be used for doing Simple Interest Calculations.

In some situations we need to calculate the Time that money needs to be invested to earn a certain amount of Interest.

Method 1 – Use I = PRT, substitute in the known values, and then solve the resulting Algebra Equation for T. Method 1 – Use I = PRT, substitute in the known values, and then solve the resulting Algebra Equation for R.

If you would like to submit an idea for an article, or be a guest writer on our blog, then please email us at the hotmail address shown in the right hand side bar of this page.

Each day Passy’s World provides hundreds of people with mathematics lessons free of charge. This entry was posted in Math Applications, Math in the Real World, Percentages and tagged calculating simple interest, financial mathematics, how to do simple interest, Interest, loan math, Money Maths, simple interest, simple interest calculations, simple interest equation, simple interest examples, simple interest find rate, simple interest find time, simple interest formula, simple interest lesson, simple interest loans, simple interest math lesson, simple interest mathematics, simple interest powerpoint, working out simple interest. Enter your email address and click the button to subscribe to Passy's World of Mathematics. Linking to UsFeel free to link to any of our Lessons, share them on social networking sites, or use them on Learning Management Systems in Schools. Loan amortization schedule free for excel Download a free loan amortization schedule for microsoft excel use this calculator to check how long it takes to pay the fixed term loan back with or without Loan amortization schedule free for excel.

A mortgage is more than a monthly payment - it is a debt instrument used to finance an asset.

On a household's balance sheet, a mortgage is a liability and, as such, it is subtracted from a household's assets to determine that household's net worth. The most popular method for determining the economics of mortgage refinancing involves calculating a simple payback period.

For example, if that calculation says that it will take 20 months for the cumulative monthly savings to be greater than the costs of refinancing and the homeowner will hold the new mortgage for a minimum of 20 months, then this method would say that refinancing is an economically wise decision.

Refinancing Affects Your Household's Net WorthHowever, this simple payback period method ignores the household's balance sheet and the total net worth equation. Refinancing a 30-year mortgage with 25 years left until it is paid off into a new, 30-year mortgage means that you might end up paying more total interest over the life of the new mortgage, even though the interest rate on the new mortgage is lower than you would pay over the remaining 25 years of the existing mortgage. A more financially sound way to determine the economics of refinancing that incorporates the true costs of refinancing into the household net worth equation is to compare the remaining amortization schedule of the existing mortgage against the amortization schedule of the new mortgage. The amortization schedule of the new mortgage will include the costs of refinancing in the principal balance.

Then, subtract the monthly payment savings between the two mortgages from the new mortgage's principal balance. The month in which the modified principal balance of the new mortgage is less than the principal balance of the existing mortgage is the month in which a truly economical refinancing payback period based on household net worth has been reached. If a simple payback period analysis is used to determine the economics of refinancing in the above example, the cumulative monthly payment savings are greater than the $3,000 costs to refinance beginning in month 19. However, if the net worth approach is used, the refinancing decision would not become economical until month 29, when the principal balance of the new mortgage minus the cumulative monthly payment savings is less than the principal balance of the existing mortgage. By calculating the true economics of refinancing your mortgage, you can accurately determine what real payback period you have to contend with if you choose to do this.

To learn more about refinancing and paying your mortgage in Seven Common Financial Mistakes and Paying Off Your Mortgage.

Please enter your contact information and one of our representatives will get back to you with more information.

There will be no processing fee charged to you by this action, as PayPal deducts a fee from your donation before it reaches Passy’s World.

You will automatically receive notification of each new lesson by email, as well as access to Free Mathematics PowerPoints and Posters. Email us at the hotmail address shown below with any comments, ideas for articles, or to report any broken links or blank images on our pages.

Too many consumers fall into the trap of refinancing a mortgage in order to lower their monthly payments without considering how that refinancing affects their total net worth. This equation is made by calculating the sum of the monthly payment savings that can be realized by refinancing into a new mortgage at a lower interest rate and determining the month in which that cumulative sum of monthly payment savings is greater than the costs of refinancing. You can copy and paste the results into a spreadsheet program and then perform the additional calculation of subtracting the monthly payment differences from the new mortgage's principal balance.

In other words, the simple payback period method tells us that if the homeowner expects to have the new mortgage for 19 or more months, refinancing makes sense.

The net worth approach tells us that it takes 10 months longer than the simple payback period approach before the refinancing is economical. We took this image from the web that we think would be probably the most representative pics for ikea kitchens design. We had taken this picture on the net that we feel would be one of the most representative images for small wrist tattoos ideas.

We took this image from the net we feel would be one of the most representative photos for hip tattoos ideas.

Does refinancing your home ever pay off, or is it just a short-term fix to a bigger problem? The costs of refinancing must be paid out of pocket or, in most cases, are rolled into the new mortgage's principal balance.

Especially if you are planning on moving in the near future, taking a few minutes to calculate the true economics of refinancing your mortgage may very well help you avoid damaging your net worth by thousands of dollars. When a mortgage balance increases through a refinance transaction, the liability side of the household balance sheet increases, and all other things being constant, the household net worth immediately decreases by an amount equal to the cost of refinancing.

And if Luke invests $2000 at 3% Interest per annum for three years, then the Principal is P = 2000.

If you have a lot of borrowed money, like for a housing mortgage, then even a small change in Interest Rate will cause a significant financial burden.

This happens because a small percent like 0.5%, of a big number like a mortgage for $400 000 will require the owner to pay an extra $2000 Interest in the next 12 months. However it is very important to realise how this Rate multiplied by the Time in the I = PRT formula leads to much higher than expected sums of money being involved. The Total Amount Roxanna has to repay is all of the $5550 Interest, plus the original $6000. Excel Spreadsheets with the I = PRT formula written into them can be used for doing Simple Interest Calculations.

In some situations we need to calculate the Time that money needs to be invested to earn a certain amount of Interest.

Method 1 – Use I = PRT, substitute in the known values, and then solve the resulting Algebra Equation for T. Method 1 – Use I = PRT, substitute in the known values, and then solve the resulting Algebra Equation for R.

If you would like to submit an idea for an article, or be a guest writer on our blog, then please email us at the hotmail address shown in the right hand side bar of this page.

Each day Passy’s World provides hundreds of people with mathematics lessons free of charge. This entry was posted in Math Applications, Math in the Real World, Percentages and tagged calculating simple interest, financial mathematics, how to do simple interest, Interest, loan math, Money Maths, simple interest, simple interest calculations, simple interest equation, simple interest examples, simple interest find rate, simple interest find time, simple interest formula, simple interest lesson, simple interest loans, simple interest math lesson, simple interest mathematics, simple interest powerpoint, working out simple interest. Enter your email address and click the button to subscribe to Passy's World of Mathematics. Linking to UsFeel free to link to any of our Lessons, share them on social networking sites, or use them on Learning Management Systems in Schools. Loan amortization schedule free for excel Download a free loan amortization schedule for microsoft excel use this calculator to check how long it takes to pay the fixed term loan back with or without Loan amortization schedule free for excel.

A mortgage is more than a monthly payment - it is a debt instrument used to finance an asset.

On a household's balance sheet, a mortgage is a liability and, as such, it is subtracted from a household's assets to determine that household's net worth. The most popular method for determining the economics of mortgage refinancing involves calculating a simple payback period.

For example, if that calculation says that it will take 20 months for the cumulative monthly savings to be greater than the costs of refinancing and the homeowner will hold the new mortgage for a minimum of 20 months, then this method would say that refinancing is an economically wise decision.

Refinancing Affects Your Household's Net WorthHowever, this simple payback period method ignores the household's balance sheet and the total net worth equation. Refinancing a 30-year mortgage with 25 years left until it is paid off into a new, 30-year mortgage means that you might end up paying more total interest over the life of the new mortgage, even though the interest rate on the new mortgage is lower than you would pay over the remaining 25 years of the existing mortgage. A more financially sound way to determine the economics of refinancing that incorporates the true costs of refinancing into the household net worth equation is to compare the remaining amortization schedule of the existing mortgage against the amortization schedule of the new mortgage. The amortization schedule of the new mortgage will include the costs of refinancing in the principal balance.

Then, subtract the monthly payment savings between the two mortgages from the new mortgage's principal balance. The month in which the modified principal balance of the new mortgage is less than the principal balance of the existing mortgage is the month in which a truly economical refinancing payback period based on household net worth has been reached. If a simple payback period analysis is used to determine the economics of refinancing in the above example, the cumulative monthly payment savings are greater than the $3,000 costs to refinance beginning in month 19. However, if the net worth approach is used, the refinancing decision would not become economical until month 29, when the principal balance of the new mortgage minus the cumulative monthly payment savings is less than the principal balance of the existing mortgage. By calculating the true economics of refinancing your mortgage, you can accurately determine what real payback period you have to contend with if you choose to do this.

To learn more about refinancing and paying your mortgage in Seven Common Financial Mistakes and Paying Off Your Mortgage.

Please enter your contact information and one of our representatives will get back to you with more information.

There will be no processing fee charged to you by this action, as PayPal deducts a fee from your donation before it reaches Passy’s World.

You will automatically receive notification of each new lesson by email, as well as access to Free Mathematics PowerPoints and Posters. Email us at the hotmail address shown below with any comments, ideas for articles, or to report any broken links or blank images on our pages.

Too many consumers fall into the trap of refinancing a mortgage in order to lower their monthly payments without considering how that refinancing affects their total net worth. This equation is made by calculating the sum of the monthly payment savings that can be realized by refinancing into a new mortgage at a lower interest rate and determining the month in which that cumulative sum of monthly payment savings is greater than the costs of refinancing. You can copy and paste the results into a spreadsheet program and then perform the additional calculation of subtracting the monthly payment differences from the new mortgage's principal balance.

In other words, the simple payback period method tells us that if the homeowner expects to have the new mortgage for 19 or more months, refinancing makes sense.

The net worth approach tells us that it takes 10 months longer than the simple payback period approach before the refinancing is economical. We took this image from the web that we think would be probably the most representative pics for ikea kitchens design. We had taken this picture on the net that we feel would be one of the most representative images for small wrist tattoos ideas.

We took this image from the net we feel would be one of the most representative photos for hip tattoos ideas.

Does refinancing your home ever pay off, or is it just a short-term fix to a bigger problem? The costs of refinancing must be paid out of pocket or, in most cases, are rolled into the new mortgage's principal balance.

Especially if you are planning on moving in the near future, taking a few minutes to calculate the true economics of refinancing your mortgage may very well help you avoid damaging your net worth by thousands of dollars. When a mortgage balance increases through a refinance transaction, the liability side of the household balance sheet increases, and all other things being constant, the household net worth immediately decreases by an amount equal to the cost of refinancing.

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