principal payment formula

We have researched the Principal Payment Formula. Hence, this article on how to calculate principal payment in excel. Below, in this article, you will find a principal payment example. Read on to discover them.

There are two basic components that make up every mortgage payment: principal and interest. Understanding both principal and interest can help you choose the best mortgage option for you.

We’ll share everything you need to know about principal and interest. We’ll cover the differences between the two and help you determine what you owe on your mortgage loan. There may be other expenses that could find their way into your monthly payment, as well.

how to calculate principal payment in excel

Principal Payment Formula

The principal is the amount of money you borrow when you originally take out your home loan. To calculate your principal, simply subtract your down payment from your home’s final selling price.

For example, let’s say that you buy a home for $200,000 with a 20% down payment. In this instance, you’d put $40,000 down on your loan. Your mortgage lender would then cover the cost of the remaining amount on the loan, which is $160,000. Since you owe your mortgage lender $160,000, your principal balance would be $160,000.

Your principal is the most important factor when it comes to deciding how much home you can afford. The principal you borrow accumulates interest as soon as you take it out. You’re also responsible for maintenance, repairs, insurance, taxes and more.

If you aren’t sure how much home you can afford, a good place to begin is with our mortgage calculator. Simply enter your purchase price, down payment and a few other factors. The calculator will then give you a rough estimate of your monthly mortgage payment.

What Is Your Interest Payment?

The second major part of your monthly mortgage payment is interest. Interest is money you pay to your mortgage lender in exchange for giving you a loan. Most lenders calculate interest in terms of an annual percentage rate (APR). APR is the amount of interest that you pay on your loan per year. For example, if you borrow $100,000 at an APR of 5%, you’d pay a total of $5,000 per year in interest. At the beginning of your loan (when your principal is high), most of your monthly payment goes toward paying off interest.

Just a few percentage points of interest can make a huge difference in how much you eventually end up paying for your loan. For example, let’s say you borrow $150,000 at a 4% interest on a 30-year loan. With this loan, your monthly payment would be $716.12. If you take the same loan with a 6% interest rate, you’d pay $899.33 each month.

The percentage of interest you pay on your loan depends upon a number of individual factors. Your credit score, income, down payment and location of your home can all influence how much you pay in interest. Take some time to raise your credit score or shop around for a loan so you can save thousands of dollars in interest over time. Let’s take a look at an example.

Say you have a choice between two lenders. One offers you $150,000 for a 30-year loan with 4% interest. The other lender offers you the same $150,000 for a 30-year loan, but with a 6% interest rate.

If you choose the first lender, you’ll pay a total of $107,804.26 in interest by the time you make your last payment. However, if you choose the second lender, you’ll end up paying $173,757.06. Just a 2% difference in interest rates means you’ll pay over $65,000 more for your loan. This is why it’s important to compare apples to apples when shopping for the right lender.

What Else Is Included In Your Monthly Mortgage Payment?

Principal and interest make up the bulk of your mortgage payment. On some loans you’ll only need to pay principal and interest to your lender each month, but your loan might also involve some other fees and expenses.

Taxes

No matter where you live, you’ll need to pay property taxes on your home. Taxes are one of the most overlooked parts of owning a home and they can also be one of the most expensive. Property taxes go to your local government and fund things like public schools, roads, fire departments and libraries.

The amount you pay in taxes depends on the value of your home and the local amenities your community offers. Part of the reason you must get an appraisal when you buy a home is so your local government can correctly calculate your taxes. Taxes can vary from year to year and your county might require you to get a new appraisal every few years.

Tax assessors will value the property and charge homeowners the appropriate rate following tax authority standards. They calculate that value using either the mill levy or the assessed property value (which is based on local real estate market conditions).

Insurance

You aren’t legally required to have homeowners insurance to own a home. However, most mortgage lenders won’t give you a loan without insurance. Homeowners insurance protects you against damage from fires, break-ins and lightning storms, just to name a few examples. You may need an additional policy to protect yourself from damage caused by flooding and earthquakes.

You may need to buy a policy called a “rider” if you have something very expensive in your home that you want to protect. A rider is an extra clause on your homeowners insurance policy that extends your coverage limits to protect a high-value item, like a piece of jewelry or artwork. You may only be able to get a certain amount of compensation for losses in a single category under normal policy limits.

For example, you might have $10,000 worth of coverage for a burglary, but your policy might say that you can only use $1,000 of that for jewelry replacement. A rider extends your limits up to the full value of the item you want to protect.

Your homeowners insurance depends on a number of factors, including:

  • Home location
  • Home value
  • Whether you live in an urban or a rural area
  • How close you are to a fire department or police station

While costs vary per state, expect to pay about $3.50 for every $1,000 of your home’s value for insurance per year. For example, if you have a home worth $250,000, you’d pay about $875 per year for homeowners insurance. Location, age of the home and additional risk factors like owning a pool can increase the annual total.

Escrow

Your mortgage lender might take a certain percentage of your monthly payment for an escrow account. An escrow account holds what you owe in property taxes and insurance premiums. Lenders collect this money and pay for it on your behalf to ensure you keep up with your coverage and tax dues.

The specific amount you’ll pay in escrow depends on your property tax and insurance rates. Your lender may reevaluate your escrow deposits whenever your taxes or insurance change.

Will My Principal Or Interest Ever Change?

Under most mortgage agreements, you’ll pay the same amount in your mortgage payment each month until you pay off your loan. However, there are two instances where your monthly payment may change: when you choose an adjustable rate mortgage and when you pay ahead on your loan.

Adjustable Rate Mortgages (ARM)

An ARM is a type of mortgage where your interest rate changes with market rates. You’ll enjoy a few years of low interest rates with an ARM. This initial introductory rate is lower than what you’d get with a fixed-rate mortgage where your interest rate never changes. Your rates will change with market interest rates when that introductory period ends. If market rates go up, your rate goes up. If market rates go down, your interest rate will too. This can affect your monthly mortgage payment because your interest rate can fluctuate.

Paying Ahead On Your Loan

Your monthly mortgage payment can change if you make an additional payment on your loan. This is because you only need to pay interest on the amount of money you owe. Most of your monthly payment goes toward interest at the beginning of your loan.

Over time the amount you pay each month chips away at your principal and the amount of interest you owe. This process, called “mortgage amortization,” gradually reduces your principal and what you owe in interest. 

Paying just a little extra money each month on your principal can save you a lot of money over your loan term, or the number of years until you have to pay it off. For example, let’s say you have a $150,000 loan with a 4% interest rate and a 30-year term. Your monthly mortgage payment would be $716.12. Paying an extra $100 a month would reduce the amount of interest you pay over the course of your loan by $25,205.78. You would also pay off your loan 6 years earlier than you would if you made no extra payments.

Consider budgeting some extra money each month to make an extra payment toward your principal balance. Be sure to tell your lender you want the extra payment to go toward principal only.

principal payment example

Summary

Your monthly mortgage payment has two parts: principal and interest. Your principal is the amount that you borrow from a lender. The interest is extra money that goes to your lender in exchange for giving you a loan.

Most lenders calculate interest in terms of annual percentage rate (APR) that you pay per year. Your monthly mortgage payment may also include property taxes and insurance. If it does, the lender holds a percentage of your monthly payment in an escrow account.

Your mortgage payment usually stays the same every month. If you choose a mortgage with an adjustable interest rate or you make extra payments on your loan, your payment can change.

BEST SITES LIKE ALIEXPRESS FOR ONLINE SHOPPING

AliExpress is a massively popular Chinese online retail service owned by Alibaba Group. It was launched in 2010 and hasn’t stopped its journey to becoming the ‘biggest online marketplace of the world‘ ever-since. AliExpress stands toe-to-toe even with Amazon in terms of buyers worldwide. It offers wholesale goods at direct-to-consumer prices from Chinese sellers.

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It also works as a great dropshipping model for a lot of e-commerce entrepreneurs. Along with a lot of good sides, AliExpress has some cons as well. The biggest problem is the shipping time of AliExpress orders, which is pretty long considering the goods come from China. Also, some orders can be very expensive after shipping charges and taxes.

So, it is a good thing to have some AliExpress alternatives whenever you don’t like its services. That’s why we are telling you about 21 best sites like AliExpress. Some of these websites offer cheaper prices and faster shipping on certain products. And, you can also use them to maintain a nice profit margin for your dropshipping business.

1. LIGHTINTHEBOX

LightInTheBox is the perfect AliExpress alternative as it is also a Chinese e-Store. It sells hot and trending products across the globe. Their products range from phone and electronics to fashion, jewelry, shoes, bags, and many other items. You can find almost anything here at a very cheap price.

The delivery time of LightInTheBox is also similar to AliExpress as their warehouses are located only in China. But, you may get a faster shipping time due to having fewer orders to ship. You can pay for your orders with PayPal, Western Union, or your credit card.

2. WISH

Wish is a widely popular online marketplace where you can buy almost anything. From clothing to footwear, electronics, healthcare items, and many more things, you can get them all for an incredibly cheap price. They are also known to offer great deals and coupons to their new customers.

Their shipping time is also faster than AliExpress as their products come from sellers located in small countries. Wish also provides an advanced rating system that is very helpful for both the consumers as well as sellers. It helps promote good ones.

3. OVERSTOCK

Overstock is a US-based online marketplace. It makes profit by selling wholesale products at a highly cheap price tag. A major portion of their stock is comprised of overstock from the major retailers or their seconds. You can find some really amusing deals here. The shipping time will also be lower as compared to the Chinese marketplaces. You can get your items within a week.

The product range of Overstock is incredible. You can find everything such as clothing, decor, kitchen appliances, and many more items. You can even find furniture and other big home items. So, you can use to fill your house with great stuff at a reduced price.

4. DEALEXTREME (DX)

DealeXtreme, more popularly known as DX, is an amazing online marketplace. The website works in a very similar manner as ‘Wish’ and sells cheap products coming directly from sellers. It has partnered with many small businesses and sells its products to a wide base of audience.

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The shipping time is a problem with DX also because their warehouses are located in China. Apart from this, you can get some really worthy deals on DX. You should always keep an eye on their clearance sales for the best prices.

5. GEARBEST

Gearbest is the perfect AliExpress alternative if you are looking to shop for the latest gadgets or electronic devices. It works with over 5000 Chinese brands and top suppliers to deliver the best products. It has products from top Chinese companies such as Xiaomi, Huawei, Lenovo, and many others. But, it isn’t just an electronic store.

You can also find a massive range of other products as well. The prices available on GearBest are reduced, and you can even reduce them with the available coupons. They also have warehouses in multiple countries. So, you can get faster shipping from the local warehouse.

6. BANGGOOD

BangGood is another Chinese e-commerce platform that provides worldwide shipping of cheap goods. You can find almost anything on this website, from clothing to electronics, and even home items. The prices available are marked down from their original prices. You can also get amazing deals during special clearance sales.

BangGood provides a free $20 coupon to every new user. The shipping time for BangGood orders is faster than AliExpress for certain products. However, the regular shipping time is similar.

7. CHINABRANDS

ChinaBrands is a widely popular Chinese e-Store where you can buy products at wholesale prices. You can find almost anything on this website at a highly affordable price. Their shipping prices are also low but you will get a long shipping time. It is the perfect website for buyers who want the lowest prices but can wait for their orders for at least a month.

Most of the ChinaBrands sellers run their factories from China, and their warehouses are located there only. This is the reason for the considerably long shipping time.

8. BONANZA

Bonanza is a unique American online marketplace where you can find a great range of products. They have over 20 million items from more than 50,000 sellers. It is a growing e-commerce store where even you can sell your items. It is a preferred platform by more than 20,000 entrepreneurial sellers. You can find some really amazing handcrafted items and collectibles here.

For people looking to shop regular items, this store may disappoint you a little. The prices of some items may be a little higher than some Chinese stores. But, the quality provided will be worth it.

21 ALIEXPRESS ALTERNATIVE STORES

Here are 21 AliExpress Alternatives that you can use to shop online.

  1. LightInTheBox
  2. Wish
  3. Overstock
  4. DealXtreme (DX)
  5. GearBest
  6. BangGood
  7. ChinaBrands
  8. Bonanza
  9. DHGate
  10. TinyDeal
  11. Target
  12. MiniInTheBox
  13. GeekBuying
  14. Jet
  15. TomTop
  16. Target
  17. MadeInChina
  18. American Greenwood
  19. Walmart
  20. eBay
  21. Amazon

FINAL TAKE

AliExpress is amazing but it is always good to have options when you are shopping. So, these are the 21 best sites like AliExpress. If you ever feel like you should look somewhere else, these are some stores that you should visit. You can also use these for your dropshipping business if you are an aspiring entrepreneur. Make sure you have a solid plan before beginning.

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