Maybe you want to buy a new house or a car and this is the first time that you have ever had to think about interest rates. Basically you are going to borrow some money from the bank and you are not aware of how much money you will have to pay back to the bank eventually for borrowing that sum over that period of time at that particular interest rate. If that is you, then it is a good time to start learning about how banks and financial institutions are calculating interest rates. Maybe you are really young or it could be that you are someone who has never had any money before and you are too embarrassed to ask someone. Don't worry. You can use this page to get onto a good start. Here is a basic video giving a definition of the interest rate calculation. After this it is probably best to get a calculator, a pen and some paper and play around with the figures because a lot of people who have never dealt with the banks might be surprised at the final value you need to pay for borrowing money. Money does not come by easy for most people and those who are going to lend you money are going to make a good profit from this.


                                 Home Value: $
Loan amount: $
Interest rate: %
Loan term: years
Start date:
Property tax: %
PMI: %
                            Output parameters »
                                      Mortgage Calculator Script

Lets take a simple example. You want to borrow USD 1,000.000 over a period of 10 years with an interest rate of 5%. Lets see how much money you will end up paying at the end of ten years if the interest rate is fixed.

At 5% fixed interest with monthly payments over a period of ten years you will actually pay an amount of money that is close to 1/4 of 1 million dollars and over 20 years it will be way over 1/2 a million dollars.

These calculations are extremely basic but it will give you an idea on how to start calculating. For definitions of the components of a mortgage payment like  1. Principal, Interest, Taxes and Insurance. 

Here is a good write up on Understanding Mortgages and Payments

If you intend to make a profit from buying property it is another subject altogether. Most people will struggle over the years just to be able to purchase  one property which they will be living in and there is a saying that possession is 9/10th's of the law. Remember that you do not legally own something until the deeds are in  your name.

Here is something else you need to familiarize yourself with. It has to do with fixed and variable interest rates. I thought this guy gave a good introduction to the other terms as well. Good luck with the loan!