Mortgage Payment Calculator

This tool is most helpful for buyer-occupants of residential real estate. It calculates what their monthly payment will be, based on the:

  • mortgage amount;
  • mortgage term;
  • mortgage interest rate;
  • annual property taxes; and
  • annual home insurance.

This tool also shows how much of the payment goes toward paying principal versus interest over time, helpful when comparing different loan products.

Mortgage Amortization Calculator

This calculator tells a homeowner how much principal they have (or will have) paid off after a certain number of monthly payments. To calculate, the homeowner needs their:

  • original mortgage amount;
  • mortgage term;
  • annual interest rate; and
  • mortgage start date.

This information is helpful in determining their current and future home equity situation. With their home equity status in mind, the homeowner can make more informed plans about selling.

This calculator also shows how much of each mortgage payment goes toward paying off interest, as well as principal. This can be useful in demonstrating the benefits of the mortgage interest deduction (MID), as mortgage interest is deductible in many cases. Since the amount of interest paid declines over the life of the loan, this calculator can help a homeowner determine how much of their mortgage payments will be deductible this year and in years to come.

For more on the MID, see The mortgage interest deduction, explained.

Gross Rent Multiplier

The gross rent multiplier (GRM) helps a buyer evaluate whether it is cheaper to buy or rent a certain home. To calculate the GRM, the buyer needs:

  • the property’s purchase price; and
  • the annual rent for that property or a similar property.

The GRM produces a number, usually around 10-25. This number represents how many times greater the purchase price is to the annual cost of rent. The seller prefers a higher multiplier and the buyer prefers a lower multiplier. There is no correct number, but is useful when comparing multiple properties, particularly unlike properties.

For more on the GRM, see Renting vs. buying: the GRM.

Cap Rate Calculator

A property’s capitalization (cap) rate is the annual rate of return produced by the operations of an income property, stated as a percentage of invested capital. To use this cap rate calculator, you’ll need the property’s:

  • value (purchase price for buyers or selling price for sellers);
  • gross rental income;
  • vacancy rate; and
  • operating expenses.

The buyer and seller hold divergent desires with the cap rate. For a seller, the lower the cap rate the better, as a low cap rate means a higher selling price (and greater profit). For a buyer, a higher cap rate is better, as it translates to a lower purchase price.

For more on cap rates, see Capitalization rates, explained.

Net Present Value Calculator

This tool calculates a property’s net present value (NPV) – also called present net worth – which is the property’s combined cash flows, including gained income and outgoing costs, starting with the cost of the original investment. It represents the best purchase price needed to meet the investor’s desired rate of return. NPV is a term used most often by commercial real estate investors, thus it is of little use to buyer-occupants or even to residential investors.

This tool also calculates a property’s internal rate of return (IRR), which is the rate at which the investment’s NPV equals zero, or the moment in time when the investment breaks even. The higher the investment’s IRR, the more quickly it breaks even. Investors first identify the desired IRR, and use this IRR goal to compare investment properties.

For more on commercial real estate investment, see first tuesday’s income property brokerage (IPB) suite of forms.