CHAPTER 36Calculation 30: Principal and Interest per Period

What It Means

In an amortized mortgage with level payments, a portion of each payment represents interest, and the balance is applied to the reduction of principal. How do you figure the interest/principal breakdown for a given payment?

In the chapter “Principal Balance/Balloon Payment,” you saw a page from an amortization schedule that helps make this clear. In the particular loan shown there, the annual interest rate is 12%. You can calculate the monthly payment amount by using any of the techniques in the “Mortgage Payment/Mortgage Constant” chapter or by simply letting the amortization schedule software do it for you. At 12% interest and over a term of 360 months, the monthly payment ...

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