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Table of Contents:

**M = P [ i(1 + i) ^{n} ] / [ (1 + i)^{n} - 1**

P = Loan Amount / Principal Amount

i = Interest rate

n = no. of years / tenure of payments

Mortgage is a loan that is taken to finance the purchase of real estate, usually with specified payment periods and interest rates.

Here the borrower (mortgagor) gives the lender (mortgagee) a lien on the property as collateral for the loan. Features of mortgage loans such as the size of the loan, maturity of the loan, interest rate, method of paying off the loan, and other characteristics can vary considerably.

A mortgage is an agreement to give up an interest in something if you fail to perform some duty. Mortgage and "home loan" are often used interchangeably. However, the mortgage is really the agreement that makes your home loan work -- the bank wouldn't lend you hundreds of thousands of dollars unless they knew they could claim your home in the event of your default.

**Example:**

Calculate the Mortgage payment and interest for the loan taken of Rs.100000, interest rate 5 % and the term or number of years is 15 years.

**Solution:**

Loan amount = P = 100000

I = Interest = 5% = 0.5/12 = 0.004167

n = no. of years = 15= 12 times = 180 payments

**Formula:**

**M = P [ i(1 + i) ^{n} ] / [ (1 + i)^{n} - 1]**

M = 100000[0.00416 (1+0.00416)

M = 100000[0. 00416(1.00416)

M = 100,000 x 0.00790 =