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## Figuring Out the Rate Note: You can use any financial calculator to do this problem, but if you want the BEST, you can get our 10bii Financial Calculator for iOS, Android, Mac, and Windows! Photo by rawpixel.com from Pexels
THE SCENARIO I was looking at a mortgage this morning, and I was curious as to the interest rate the borrower is paying. The loan has had regular monthly payments paid over the last 5 years, and \$198,984.80 is owed today. The monthly payment is \$1,504.59, which includes \$454.28 in Escrow impounds (for property taxes and insurance). The loan amortizes fully over 30 years. The question: What's the interest rate on this mortgage?
THE SOLUTION This one is pretty straightforward. The only things we don't know are the monthly Principal and Interest (P&I) payment and the amount of time left on the loan. To find P&I, we subtract the impounded amount (\$454.28) from the total payment (\$1,504.59) to get \$1,504.59 - \$454.28 = \$1050.31. To find the time left, we subtract the elapsed time (5 years is 5 x 12 = 60 months) from the original 30 years = 30 x 12 = 360 months. 360 - 60 = 300 months. First things first, make sure the calculator is using 12 Payments per Year. N: 300 (The loan has 300 monthly payments still due) I/YR: (This is what I'm trying to find) PV: 198,984.80 (\$198,984.80 is owed today) PMT: -1,050.31 (The monthly payment is \$1,050.31) FV: 0 (The loan amortizes fully)

The loan has an interest rate of 4.00%.

What do you think? Does that seem like a low rate to you? Or high, given the time frame in which it was originated? Let us know in the comments!