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How to Calculate Interest Only Payments – Day 5

How does somebody calculate Interest Only Payments?  And WHY does it even matter?  When will it be needed?   The answers you are looking for:

Welcome to Day #4 Post of my personal 30 day challenge.  As I mentioned earlier…one of my goals as part of my 30 day blog posting challenge, is to get out there and create some really useful content, and that includes creating 30 videos.  Well, here is one of them.  Also, please see some further explanation below the video.

When do you need to know about calculating interest only monthly payments in real estate investing?

In my experience, I can relate to 3 main times:

1) Private Lenders – when you are borrowing money from a friend, relative, etc and they want to receive  a return on their investment.

2) Hard Money Lenders – HML’s typically use points and interest only payments as part of their payback.

3) Buying Properties with Owner Financing – When you buy homes from owner’s, you can negotiate any terms to the deal you may feel work for you.

What are the advantages of Interest Only Payments?

In a nutshell, it can increase your cashflow until you sell the property, or put into place financing that is more permanent (refinance).

What is the Calculation?

Monthly Payment = (UPB X IR)/12

UPB=Unpaid Principal Balance

IR= Interest Rate (please be sure to use a decimal…ie.  if your interest rate is 10%, use .10 in the calculation.  If it is 4%, use .04.

Later,

Brandon

PS.  In tomorrow’s post, I’m going to teach you how to calculate Cash on Cash Return (CCR). Stay tuned.

Have any questions?  Comments?  Suggestions? Please leave them in the comments below.

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  1. […] Also, if you found this video helpful, you might also enjoy the one from yesterday about calculating monthly interest only payments. […]

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