Calculate rental property monthly cash flow, mortgage payment, and cash-on-cash ROI from price, rent, down payment, rate, and expenses.

Illustrative assumptions: 7% annual interest, 30 years and monthly expenses of 40% of rent.

Fixed-rate principal and interest only. Include taxes, insurance, vacancy and other costs in expenses. Excludes closing costs, tax benefits and appreciation; cash flow does not predict investment success.

Rental Mortgage Calculator Formula

The following equation is used to calculate the Monthly Mortgage Payment (M) for a rental mortgage.

M = (P × i × (1 + i)ⁿ) / ((1 + i)ⁿ - 1)
  • Where M is the monthly mortgage payment ($/month)
  • P is the principal loan amount ($)
  • i is the monthly decimal interest rate (annual percentage rate / 100 / 12)
  • n is the total number of monthly payments (term in months)

This formula estimates principal and interest for a fully amortizing fixed-rate loan. At 0% interest, use M = P/n. Monthly cash flow equals rent minus operating expenses minus this payment. Include taxes, insurance, mortgage insurance and other applicable costs in expenses without counting principal and interest twice.

What is a Rental Mortgage Calculator?

Definition:

A Rental Mortgage Calculator is designed to assist potential property investors or landlords in determining the financial viability of purchasing a rental property with a mortgage. It calculates monthly mortgage payments based on loan terms, interest rates, and property price, while subtracting the supplied monthly operating expenses from rental income and principal-and-interest payments. It excludes tax benefits, closing costs and appreciation. Quick Check assumes an illustrative 7% rate, 30-year term and expenses of 40% of rent; Full Detail uses your inputs. Cash-on-cash return uses only the down payment as its cash-investment denominator and does not determine overall profitability.

How to Calculate Rental Mortgage?

Example Problem:

The following example outlines the steps and information needed to calculate a monthly rental mortgage payment.

First, determine the principal amount. In this example, the total loan for the property is $200,000.

Next, find the monthly interest rate and the total number of monthly payments. Suppose the annual interest rate is 6% (0.06/year); the monthly interest rate is 0.06/12 = 0.005. For a 30-year mortgage, there are 30 * 12 = 360 monthly payments.

Finally, calculate the monthly mortgage payment (M) using the formula above:

M = ( 200,000 * 0.005 * (1 + 0.005)^360 ) / ( (1 + 0.005)^360 - 1 )

This result, combined with estimated property expenses and rental income, gives you the expected monthly cash flow and helps you assess the feasibility of the investment.

FAQ

What additional costs should be considered when calculating rental mortgage feasibility?

Beyond the monthly mortgage payment, consider property taxes, insurance, maintenance, repairs, homeowners association fees (if applicable), and potential vacancy losses. Factoring these into your calculations will help provide a more accurate view of your investment’s profitability.

How accurate is a Rental Mortgage Calculator in predicting investment success?

While a Rental Mortgage Calculator can provide valuable insights, its accuracy depends on the quality and accuracy of the data input. Market fluctuations, unforeseen maintenance expenses, and changes in rental demand can affect actual results.

Can a Rental Mortgage Calculator factor in tax benefits?

This calculator does not calculate tax benefits or deductions. Any tax effects require a separate analysis; they are not included in its cash-flow or cash-on-cash result.