How is interest calculated on mortgages?

I have a mortgage on 拢76000 at a rate of 7.44%





So in my calculations thats 拢82,000





but the mortgage people say ill end up repaying 拢210,000 at 拢450 a month over 40 years.





Can someone explain this to me please?





Many Thanks :DHow is interest calculated on mortgages?
The interest rate quoted is the interest you pay PER YEAR. As you mention, you are taking the loan for 40 years.





Each year you pay a little more on principle then the previous year, thus a little less interest each year. Over the course of 40 years of doing this, the loan balance gets to zero. This is called loan amortization.





So, in the first year you will pay interest of 7.44% on 76,000. That is interest of 5,654 in the first year.





Normally, in the first year, your actual payments would total about $6,000 (500 per month). This means the extra $339 reduces your principal by that much.





So in the second year you will pay interest of 7.44% on $75,631. That is interest of 5,629. Which means you pay 371 of principle





This goes on down the line for 40 years. Each subsequent payment has a higher amount going to principle, until the last payment, when the loan is totally paid off.





However, the numbers you provide from the mortgage people do not quite tie together. It is close, but not 100%. You cannot fully amortize your loan of 76,000 at the stated interest rate over exactly 40 years by paying $450 per month. The payment would be almost $500 per month to do this.How is interest calculated on mortgages?
There is some information missing in this problem. You need to ask the mortgage people how often that rate is compounded per year. If you can give me that information, then I can help you. I took a course in financial mathematics, so I know all the math like the back of my hand.





To add details:


1. On the page for your question, click on the ';Edit'; button, which has a pencil next to it.


2. On the drop-down menu, click on ';add details';.





Also, your mortgage people are terrible at math:





If you pay 450 a month, then that's a total of 450 * 40 * 12 = 216,000 in 40 years. If you are not comfortable with this incompetence, then you should use a different company.
interest is a difficult thing to explain. I think your math was done yearly correct? Don't forget to compound it...





With a mortgage you pay interest every month on the entire unpaid balance.





Yes you pay interest every month.. on a 76,000 @ %7.44 you would pay about 472 interest the FIRST MONTH





This website explains it the best





http://michaelbluejay.com/house/interest.html

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