Note that typically the tax is not included in the loan principle unless it is specifically rolled into the loan. There are two types of taxes. One is a property tax and the other is a transfer tax. Either party may pay either tax. [3] X Research source In the United States for non-foreclosure properties, the seller generally pays the transfer tax, on some foreclosures the buyer pays. Both sides usually pay their prorated portions of the property tax due up to the date of sale for the seller and from the date of sale for the buyer. [4] X Research source A lender can roll these taxes into the loan if the property appraises high enough to allow enough equity or there is enough of a down payment to roll them in and have the required down still.

r: Interest rate. This is the monthly interest rate associated with the loan. Your annual interest rate (usually called an APR or annual percentage rate) is listed in the loan documents. To get the monthly interest rate that you need, simply divide the annual interest rate by 12. For example, an 8% annual interest rate would be divided by 12 to get a monthly interest rate of 0. 67%. This would then be expressed as a decimal for the equation by dividing it by 100 as follows: 0. 67/100=0. 0067. So 0. 0067 will be the monthly interest rate used in these calculations. n: Number of Payments. This is the total number of payments made over the life of the loan. For example, in a three year loan paid monthly n = 3 x 12 = 36. P: Principal. The amount of the loan is called the principal. This is typically the final price after tax of the asset purchased less any down payment.

For example, an 8% annual interest rate would be divided by 12 to get a monthly interest rate of 0. 67%. This would then be expressed as a decimal for the equation by dividing it by 100 as follows: 0. 67/100=0. 0067. So 0. 0067 will be the monthly interest rate used in these calculations.

Solve the parentheses first. Simplify the first part of the equation to $3,500*(0. 0067(1. 0067)^36)/((1. 0067)^36-1). Handle the exponents. This then becomes $3,500*((. 0067(1. 272)/(1. 272-1)) Finish the parts still in parenthesis. This results in $3,500*(0. 008522/0. 272) Divide and Multiply the rest. The result is $109. 66.

Rate is the monthly interest rate changed and it is 0. 67% in our example. This is the annual rate of 8%, listed as the APR in loan paperwork or documentation, divided by 12 (8%/12=0. 67%). This will also need to be expressed as a decimal by dividing the number by 100, so it will be 0. 67/100, or 0. 0067, when used in the equation. Nper is the number of periods in the loan. So if it is a 3 year loan paid monthly that is 36 payments (12 x 3 = 36). Pv is the present value of the loan or the amount you are borrowing, we will assume $3,500 again. Fv is the future value of the loan after 5 years. Typically, if you plan on paying off the full value, this is entered as a 0. There are very few cases where you would not enter a “0” in this box. A lease is an exception where Fv is the residual value of the asset. Type you can leave this blank in most cases, but it is used to change the calculation if you make the payment at the beginning or end of the period. If you were to type this into the Excel cell without using the fx dialog box, the syntax is =PMT(Rate,Nper,PV,FV,Type). In this case “=PMT(0. 0067,36,3500,0)”.

If you are estimating payments for a loan you are considering, many of the sites also include probable interest rates for that type of loan. [8] X Research source