Interest Rates- What will you earn?

Hey everyone!

     Have you thought of investing or wondered how much you would owe on that interest rate if it was compounded annually, quarterly, etc?

     Don't be stuck to a person or a computer calculator to find this out. Make sure it's being calculated correctly. Ask them what formula they use. I'll show you a couple different formula's, and even if they don't use the same ones, you'll be able to get the idea and be able to plug the correct numbers in, and solve for the missing value. There can only be one missing value, or something else is missing. Good explanation, right? HAHA! I know. It's a bit general to get so detailed so let me just give you one example of how I knew I needed to ask more questions.

    Here's my story: We changed banks to make it more convenient for the location, and they were giving away about $150 to switch, so that sweetened the deal. Well, with the switch they did a free refinancing application for our house, meaning they were trying to take over our loan and see if they could give us a better interest rate/payment. The girl was telling us that it was going to be $150 less per month to go with them. She also said it was a 20 year mortgage, we have 28 years left on this one, and she said the interest rate was 4 percentage points higher. Umm, yes, read flag, right?

So to recap, she said, 4% higher interest rate, 8 years less payments, and $150 less a month.                
      Something as in everything was not right. When Justin told me this, I said, "No. That's wrong." I went into the bank to sign my paperwork for the accounts and she said the same thing. I asked to look at how they figured it out. The girl could not tell me, she just showed me the computer calculator that she plugged the numbers into. I asked if it was everything, taxes, and home owners insurance, as she had assured Justin it was. She said,"Yes, but not like your cable bill or electric, anything like that." Right then I realized, she had no idea what she was talking about, and she thought that I had bought 2 houses within 5 years and not understood that I don't pay for my cable on my mortgage bill. Long story short, the real lady that had our case got back to us and it would have been $250 more a month then what we already pay, and that number that was given was not including the two things I had asked about.

    Now I'm not going to get into how to calculate house payments just yet, but you can get the idea of how number sense and understanding how raising and interest rate and putting it over a shorter amount of time would NOT lower a payment. Sometimes people, just wow....

Okay, so her's what we're doing: Simple Interest and Finding the Total amount when given the principle, rate, time, and how it's compounded. VIDEO

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