Mortgage Formula

Clauric

Going to put this here, as it is probably more appropriate.

I'm looking to buy a house, as an investment property. The bank has offered me:

1) A variable rate mortgage, which I can calculate the monthly repayments, using:

Monthly Repayment = [ r * P (1 + r/N)^N ] / { [ (1 + r/N)^N ] - 1 }

2) A fixed rate mortgage, for which I use the same formula as above. Any difference between the fixed and variable interest due will be used as a pre-payment against capital.

3) A mix of fixed and variable rates.

I am trying to figure out how to calculate the monthly repayments for the mixed mortgage. If I use the formula (above), the repayments do not cover the mortgage in the period N.

Do I need to change the interest rate, r, to the weighted average of the fixed and variable rate, or do I need to recalculate the monthly repayments when the fixed interest payments have expired?

Many thanks for any help, and any links or formulae would be gratefully appreciated.

BrokenArrows

You might have more luck in the Mathematics forum.