True Cost Calculator

Formula

The formula to calculate the True Cost (TC) is:

\[ TC = P + (MP \times n) + F \]

Where:

$ TC $ is the true cost of the loan or mortgage
$ P $ is the principal loan amount
$ MP $ is the monthly payment
$ n $ is the total number of monthly payments
$ F $ is the total fees and charges associated with the loan or mortgage

Definitions

True Cost (TC): The comprehensive cost of a loan or mortgage, including the principal, monthly payments, and any associated fees and charges.
Principal Loan Amount (P): The initial amount of money borrowed.
Monthly Payment (MP): The amount paid each month towards the loan or mortgage.
Total Number of Monthly Payments (n): The total number of monthly payments to be made over the life of the loan or mortgage.
Total Fees and Charges (F): The total amount of fees and charges associated with the loan or mortgage.

Example

Let's say the principal loan amount (P) is $200,000, the monthly payment (MP) is $1,500, the total number of monthly payments (n) is 360, and the total fees and charges (F) are $5,000. Using the formula:

\[ TC = 200,000 + (1,500 \times 360) + 5,000 \]

We get:

\[ TC = 200,000 + 540,000 + 5,000 = 745,000 \]

So, the true cost of the loan or mortgage is $745,000.