How do you calculate a mortgage in your head?

Question

Hello!

I am curious how you all seem to calculate a mortgage payment on the spot. This seems crucial when you are in the middle of a negotiation on purchase price, possibly trying to push the price lower or knowing when to walk when the price to CoCROI gets too high.

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The equation I seem to think of is this

((<Purchase Price> * .01) / 2) + (<PurchasePrice> * .002)

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So an example of this would be:

($280,000 * .01) / 2 + ($280,000 * .002)

$2,800 / 2 = $1,400 + 280 = $1,680

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I seem to be within $5 of every mortgage I am considering. Yes, I know this does not include utilities or HOA or anything else.

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And yes, if you guess, I'm a software engineer at a tech company, so I love algorithms to calculate things. :)

Thanks.

- Nick

Chris Mason · Answer

It's state specific b/c of property taxes.

If you want a super rough ballpark, each $100k = $500/mo.

That ballpark works for both 5% down owner occ SFR, and 25% down rentals. The higher loan amount of the owner occupant is ballpark a wash with the higher rate of the investor, who is borrowing less due to the larger down payment.

You can scale it up and down easily. If $100k -> $500/mo, then obviously $25k -> $125/mo.

You will note that I said "ballpark" like 5 times just now -- for a reason.

Anything more detailed, it's spreadsheet time.

Matt Cecil · Answer

@Nick Brimmerq phone app for 20-30yr amortization.

For private money…

purchase price x .XX% (lending percentage) / 12 months = monthly payment.

Purchase price x .0X (points) = origination costs