Interest Rate Formula?

xeon9

Hi guys
What is the Interest rate formula of this sample below?,

Mortgage.     250,000
Term:          30
Total interest paid: $285,340.18
compound: semi annually 

What is the interest rate?

Thank you very much in advanced.

Thrugelmir

Semi annually is not a calculation used by UK lenders.

xeon9

It's canada.

How about interest rate by monthly?

Thrugelmir

This a UK based forum.

xeon9

Come on guys I know it is similar.
Please...

kingstreet

I've been a mortgage broker for 28 years and I haven't a clue what you are trying to achieve?

On this forum, we help people with problems getting a mortgage, or with post-sale issues, such as moving home.

Often, the answers are peculiar to the UK.

Jimbo1976

$250,000 borrowed over 30 years paying about $286,472 interest gave an interest rate of 7.2% on my excel calculator

JimmyTheWig

Not quite sure what the question is, OP.
Can you give us an example of what the answer might be?

I.e. are you looking for the interest rate, e.g. 7.2%?
Or monthly repayments, e.g. $1,500?
Or some sort of "formula", e.g. i = (x + a)^c?

And why do you want to know? The context might help.

xeon9

@JimmyTheWig

Yes I want to know the "Formula" of 7.2% Interest rate?
How did you guys got that answer?

Is (x+a)^c is the interest rate formula?
If yes can you guys explain that to me in detail please.

JimmyTheWig

xeon9 wrote: »

@JimmyTheWig

Yes I want to know the "Formula" of 7.2% Interest rate?
How did you guys got that answer?

Is (x+a)^c is the interest rate formula?
If yes can you guys explain that to me in detail please.

Hi xeon9, I think I may have confused you.
(x+a)^c isn't an interest rate formula. It was just an example of _a_ formula.

I ask again why you want to know. This is pretty relevant, I think.


If you just want a way of finding the rate, the easiest way is probably to go somewhere like http://www.moneysavingexpert.com/mortgages/mortgage-rate-calculator and play around with the figures.
Put in current debt of 250000 and remaining term of 30 years.
Clear out the interest rate and put in the monthly repayment of 1487 (total of mortgage debt plus total interest, divided by 30 years, divided by 12 months). Blank out the fees. Hit calculate.
This gives an interest rate of around 5.9%.
Does this give you what you want? It's not a "formula", but it gives you the answer.
Obviously it doesn't deal with semi-annual compounding, but you won't get that from a UK site.


If, on the other hand, you want a quick formula so you can compare two mortgages a rough rule of thumb would be
(the average balance) x (interest rate) x (number of years) = (total interest charged)
(m/2) x i x y = I
i = 2I/(my)
where
m is the initial mortgage amount (so m/2 is the average balance)
i is interest rate (as a decimal)
y is the number of years
and I is the total interest charged.

So in your case we have
i = (2 x 285340.18) / (250000 x 30)
= 0.076
= 7.6%

There error here is that m/2 isn't the average mortgage balance, because interest is compounded. But it might be a rule of thumb that you can work with. Or you may be able to refine it further yourself.


If you want an exact rule, you might be better off on a more specialised website. Or you might have a tutor who can help you?

getmore4less

You need US based amortization calculator they deal with the more unusual schedules since UK is predominately daily interest monthly compound.

bi annual is never(?) used in the UK so no one will even know what it means


google : amortisation bi annual compounding

try these

http://www.amortization.com/what_is_semi_annual_compounding.htm

http://www.canadamortgage.com/articles/learning.cfm?DocID=2

http://en.wikipedia.org/wiki/Compound_interest