Saturday 5 May 2012

How to Calculate a Mortgage Constant

A mortgage constant is a useful tool for a real estate investor, because it simplifies and clearly shows how much the borrower over a certain period of time to pay. This value is suitable only for the closed, fixed-rate mortgages. The calculation looks difficult, but with correct entered math and exact values, you can determine easily the mortgage constant.

Instructions

1. Collect the required material. Ensure that you the mortgage statement. In this document show your monthly payment-including a breakdown between principal and interest-your balance and your interest rate. Their loan agreement show the original amount borrowed and the confirmation that the loan is closed a variety. A repayment plan confirm your calculations on the mortgage constant.


2. Write the following formula: MC = interest rate / [1 [1 / (1 + interest rate) ^ n]]. The following values MC: Mortgage constant; Interest rate: Mortgage rate; ^ n: exponent of the term of the loan.

3. The following example try. Find the mortgage constant for a mortgage $100,000 with an interest rate of 8% and a term of 20 years (240 months). Use the formula: MC 08 = / [1 [1 / (1.08) ^ 20]]. If properly calculated, your mortgage constant to. 10184 should come.

4. Figure your annual payment simply multiplied by your loan amount the mortgage constant. In the example, this looks like $100,000 x 10184 = $10.184. Therefore, your will be $10.184 annual payment on the mortgage. 

No comments:

Post a Comment