Question

If you are considering selecting between a mortgage of either a 15 year mortgage or a 30 year mortgage, what changes must be made to the variables in the problem to solve for the payment?

Answer 1

For a mortgage, the variables needed for calculation of payments (PMT) are

Interest rate (RATE), Number of years (NPER) and the loan amount (PV).

Now if the Nper changes from 15 years to 30 years, then considering and assuming that Interest rate and Loan amount does not change, then

PMT will be a function of NPER , RATE and PV. So only the variable NPER needs to be changed to solve for payment.

If however, the PMT remains the same, the either NPER or RATE must be changed to arrive at the same value for PMT for 30 year and 15 year mortgages.