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## Flexible Rate

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THE SCENARIO Last time, we discussed how long it would take to pay off a \$100,000 mortgage at 6% if we could only afford a \$475 monthly payment. Let's say, however, that we managed to find a 40-year fully-amortizing loan for \$100,000 that has a \$475 per month payment. The question: What's the interest rate on that loan?
THE SOLUTION This one is pretty straightforward. First things first, make sure the calculator is using 12 Payments per Year. N: 480 (The loan is for 40 years, which is 40 x 12 = 480 months) I/YR: (This is what I'm trying to find) PV: 100,000 (The amount borrowed is \$100,000) PMT: -475 (The monthly payment is \$475) FV: 0 (The loan amortizes fully)

This loan would have an interest rate of 4.89%.

Last time, the situation seemed hopeless - there was no way to pay off the loan! But keep in mind when looking at potential deals that there are often additional variables - in this case, the interest rate of the loan. If you can't make it work at 6%, maybe it'll work at 5%, 4% or lower.

What do you think? Does this answer surprise you? Why or why not? Let us know in the comments!