How to Calculate Annual Percentage Rate on Mortgage Loan

How to Calculate APR on Mortgage Loan - Tutorial, Formula, Example

Definition:

This tutorial helps you to calculate effective annual interest rate (APR) on a mortgage loan.

Formula:

L - F = P1/(1 + i) + P2/(1 + i)2 + P3/(1 + i)3 +... Where, i = IRR L = Loan amount F = Points and all other lender fees P = Monthly payment

Example:

Assume the loan amount is 100,000 term 30 years, rate 7%, and closing cost 2,000. The last consists of all lender charges, but not charges for appraisal, credit or other third party services.

Given,

Loan Amount (L) = 100000
Rate of Interest (R) = 7% = 0.07
Number of Period (N) = 30 years
Total Closing Costs (F) = 2000
Number of Points Paid = 0

Solution:

EMI = 665.30 ( Click here to calculate EMI )
PV = -98000
APR = 7.24 %

Result:

Mortgage APR is 7.24 %

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