The tutor notices that financial math is more prominent in high school than it was twenty years ago.   Probably the change is good; let’s embrace it with a first look at mortgage payments. This topic comes up annually in tutoring.

Even before the advent of financial calculators, people had to calculate annuity payments, mortgage payments, etc.  Such financial products have existed certainly since the industrial age – probably even before.

The formula to calculate a mortgage payment isn’t that difficult to use, but probably outside the comfort zone of most consumers.  The obvious question:  How, in the 70s, did people calculate mortgage payments, when financial calculators – if they existed at all – were rare?

The simple solution:  they used mortgage tables.  You looked up the interest rate and the term (in years) of repayment.  The amount you’d arrive at would be the payment per thousand dollars of the loan.  They were called mortgage tables, but you could use them for any loan.

I’ve found a table I like the look of over at realsavvyrealestate.com. Let’s put it to work:

Example: Calculate the mortgage payment for this case:

On the table from realsavvyrealestate.com., we look down the left column to find 6.5%. From there, we look across to the 25 year column. The number we arrive at is 6.75207, which means that the payment is $6.75207 per thousand dollars of loan. The loan amount in this case is $300 000. Therefore, the monthly payment will be

$6.75207×300=$2025.62

Mortgage tables enable easy loan payment calculations. Many people from an earlier generation – myself included – can’t help but prefer them even now.

Mortgage tables, of course, can’t handle the diversity of financial situations that a dedicated calculator can. In coming posts I’ll explore the use of a financial calculator – and perhaps even the option of doing the calculations using financial formulas.

Cheers:)

Jack of Oracle Tutoring by Jack and Diane, Campbell River, BC.