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What does the loan cost each month, and how much of that is interest? Enter price, down payment, rate, and term to see the payment and the split behind it.
The payment formula is M = P × [ r(1+r)^n ] ÷ [ (1+r)^n − 1 ], where r is the monthly rate and n is the number of payments. On a $340,000 loan at 7% over 30 years, r is 0.5833% a month and n is 360, which produces a principal and interest payment of about $2,262 a month, or $27,144 a year.
That figure is principal and interest only. A servicer usually also collects property taxes and insurance in escrow, though private mortgage insurance generally does not apply at the 20% to 25% down that rental financing requires. Taxes and insurance belong in operating expenses when you compute NOI, not in debt service, and putting them in both places is the most common double-count in rental analysis.
The first year of a 30-year loan at 7% is nearly all interest. Of the $27,144 paid on this $340,000 loan, about $23,690 is interest and $3,454 retires principal.
Rate moves the payment harder than price does at these levels. Cutting the price by $25,000 saves about $133 a month at 7%; cutting the rate by a single point on the original loan saves about $224.
Investment property loans price above owner-occupied loans, and the spread is a program-level term rather than a published constant. It surfaces as some mix of a higher rate and points at closing, so the comparison worth making is quote against quote, not quote against an owner-occupied average.
Amortization length trades total interest for monthly room. Stretching this loan to 40 years drops the payment to about $2,113 and lifts DSCR from 0.97 to 1.03, at the cost of an extra decade of interest.
More than an owner-occupied purchase, commonly in the 20% to 25% range, with the exact requirement set by the lender and the loan program. House hacking a small multifamily you live in is the standard exception, and it follows owner-occupied rules instead.
Yes. Lenders price the added default risk of a property the borrower does not live in, and the premium appears as rate, points, or both. Because it varies by program, the useful comparison is between term sheets rather than against a national average.
Keep them out of debt service and inside operating expenses. They are already subtracted in NOI, so adding them to the payment as well double-counts them and understates DSCR and cash flow at the same time.
About $23,690 on a $340,000 loan at 7%, against $3,454 of principal. The ratio inverts slowly: by year ten this loan retires roughly $6,470 of principal a year.
It makes the monthly math work and the total cost worse. Forty years instead of thirty lifts this deal from a 0.97 DSCR to 1.03, which can be the difference between financeable and not, while adding ten years of interest payments.
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