The PMT function in Excel calculates the payment for a loan that has constant payments and a constant interest rate. This formula will not work with a flexible interest rate.

 =PMT (rate, nper, pv, [fv], [type])  
  • Rate:     Interest Rate per period
  • Nper:    The number of periods
  • Pv:         Present value of loan/investment
  • Fv:         Future value of the loan/investment – This is optional. If left blank, it will default to zero.
  • Type:     Defines if the payment is made at the start or end of the period. If left blank, defaults to zero.

              0 – Payment is made at the end of the period
             1 – Payment is made at the beginning of the period

PMT Function in Excel Example

PMF Function in Excel

In the above example, we are taking out a loan for $225,000 with a 30 year fixed interest rate of 3.75% (Very good rate).  Over 30 years, we end up paying $375,123.63, with $150,123.63 in interest.

The above calculation using the PMT Function does not account for Homeowners Insurance or local/state taxes. Modifying the spreadsheet to include these calculations is very easy.