Mortgage Calculator

A mortgage calculator computes the periodic payment on a loan from the principal, interest rate and term using the annuity formula. A DSCR calculator is a specialized mortgage calculator: it computes the payment, adds taxes, insurance and dues, and divides rent by the result.

The payment formula is the same in both: principal times the monthly rate times (1 + rate) to the number of payments, divided by that quantity minus one. At 7.5% over 30 years the payment on each $1,000 borrowed is about $6.99 a month.

The DSCR calculator uses the formula twice. Forward, to turn a loan amount into a payment for the denominator. Backward, to turn the maximum payment the rent supports at a target ratio into the largest loan a lender will make. That second step is what a plain mortgage calculator cannot do and what makes the ratio useful for pricing an offer.

Further reading: Mortgage Calculator on Wikipedia.