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Math Help - annual rate of return

  1. #1
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    annual rate of return

    cant find a formula that works..again no interest rate given..thanks for the help

    question: whats the annual rate of return to the lender offering a 95,000, 30yr mortgage with monthly payments of$756.23
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  2. #2
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    The mortgage constant is:

    (756.23*12)/95,000 = 0.09552

    would this help you find the rate of return?
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  3. #3
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    Hmmm...

    im not sure but im thinking like this

    mothly payments of 756.23

    in one year the guy will pay that times 12 which is 9074.76

    in 30 years, when the mortgage is done he will have paid that times 30, or 272242.8

    now, how much money did the lender make total?
    the amount he got back minus the amount he lent, or 272242.8 - 95000, i.e. 177242.8.

    now, that was the profit over 30 years, so how much was the profit, or "return," per year?
    that divided by 30, i.e. $5908.09/year

    i dont know if that is the right way to do it or the answer, but at least it sounds plausible to me

    PS: If you're thinking about taking this deal, dont, you will be paying over twice, in fact almost 3 times, the actual value of the loan at the end.
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