A loan-to-interest table is a very useful report for real estate investors or brokers doing a real estate analysis because it concisely shows various combination’s of monthly payment based on a range of loan amounts and rates of interest.
In just one sitting you can precisely know what your monthly payment will be depending on your loan and the interest rate you have to pay to obtain that loan.
A loan-to-interest table is a spreadsheet with columns and rows that intersect. The column headers show differing interest rates and the utter-most left column rows of differing loan amounts and the appropriate monthly payment is shown inside the cells where they intersect.
In the table illustrated to the right, for example, the table is constructed with the loan amount running up and down in the left column and interest rates running left and right along the top row.
In this case my investor was considering the acquisition of a rental income property with a fully amortized thirty-year loan of $350,000 at 6.0% annual interest rate and a monthly payment of 2,098.43.
We decided to create the loan-to-interest table because the he was interested in seeing how the monthly payment would be affected with perhaps more or less down payment and at various interest rate options.
So we based our scenario upon a range of loan amounts at 5,000 intervals and various interest rates at 0.125% intervals.
The real estate investor was quickly able to determine the monthly mortgage payments for loan amounts ranging from $230,000 to 470,000 at interest rates ranging from 5.750% to 6.25%.
You can use Excel if you’re interested in constructing this table. It will require some knowledge of Excel and loan amortization formulas, but you can do it if you have the time.
Here’s a quick and dirty list of what to consider.
- Number of rows and columns to include for payment variations
- Allowable loan amount “steps”
- Allowable interest rate “steps”
- Reference to a starting loan amount and interest rate
You will also want to consider including a “form interface” that enables you an easy way to “step” the loan amount and interest rate. Here’s how I did it for my real estate investing software solutions to give you the idea.
You certainly don’t have to get as fancy as I did for your own interface. But if you’re serious about using a loan-to-interest table for your real estate analysis, you definitely want to include some way to quickly and easily create the scenarios.
A loan-to-interest table is a concise way for you or your customer to decide which combination of loan amounts and interest rates provide an acceptable (or desired) monthly loan payment for any investment real estate under consideration. I strongly recommend it for anyone engaged in real estate investing business. You will find it a real benefit.