Question 131763
Step 1.  Express the interest rate as a decimal fraction.  6.875% is 0.06875.


Step 2.  Decide how many payments you will be making in a year.  If you are making monthly payments, then it is 12, biweekly is 26, quarterly is 4, etc.


Step 3.  Divide the interest rate by the number you derived in step 2.  For monthly payments at 6.875%, {{{0.06875/12=.00564}}} (close enough).  This is the interest rate per payment period, or {{{r}}} in the formula in Step 5.


Step 4.  Multiply the number of years of the loan term times the number derived in step 2.  For a 30 year loan with monthly payments, that is {{{30*12=360}}}.  This is the total number of payment periods, or {{{n}}} in the formula in step 5.


Step 5.  Most fun of all.  Substitute the values derived in steps 3 and 4 into:


{{{(r+r/(((1+r)^n)-1))}}}, and calculate.


Step 6.  Multiply the result of step 5 times the principal amount of the loan, $125,000 in your case. The result will be your monthly payment.


Step 7.  Multiply the result of step 6 times the number of payment periods from step 4.  360 for monthly payments for 30 years.  This will be the total amount paid.


Step 8.  Subtract the principal amount of the loan from the result in step 7.  The result will be the amount of interest you will have paid if you keep the loan to maturity.


The good news is that there are a zillion websites with loan calculators that will do steps 1 - 5 for you if you type in the loan parameters.  Just Google 'Loan Calculator' and you'll find something that will give you the payment amount.