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Points & Interest formula

Monthly Interest (Interest-Only) Formula

monthly interest = (principal × annual rate) ÷ 12

Monthly Interest (Interest-Only)

monthly interest = (principal × annual rate) ÷ 12
  • principal — Outstanding loan balance
  • annual rate — The stated annual interest rate, as a decimal

Worked example: $200,000 principal at 6% annual interest.

  1. $200,000 × 0.06 = $12,000 annual interest
  2. $12,000 ÷ 12 = $1,000

$1,000 monthly interest

Other Points & Interest formulas

Monthly Interest (Interest-Only) practice questions

Every Freehold question shows why the right answer is right — and cites its source.

A $150,000 interest-only loan carries a 6% annual interest rate. What is the monthly interest payment?

  1. $625
  2. $700
  3. $750
  4. $900
Show answer & explanation

$750 — Annual interest is $150,000 × 0.06 = $9,000. Dividing by 12 months gives a monthly interest payment of $750.

Source: PSI National Real Estate Exam Content Outline §11 Real Estate Calculations

At closing, the seller's prorated share of the annual HOA dues was $637.50 for 8.5 months of ownership (paid in arrears, monthly proration). What is the annual HOA due amount?

  1. $900
  2. $956.25
  3. $7,650
  4. $750
Show answer & explanation

$900 — The monthly rate is $637.50 ÷ 8.5 = $75. Multiplying by 12 gives the annual amount: $75 × 12 = $900.

Source: PSI National Real Estate Exam Content Outline §11 Real Estate Calculations

An interest-only loan of $210,000 carries a 4.8% annual interest rate. What is the monthly interest payment?

  1. $420
  2. $10,080
  3. $1,008
  4. $840
Show answer & explanation

$840 — Annual interest is $210,000 × 4.8% = $10,080. Dividing by 12 gives a monthly payment of $840.

Source: PSI National Real Estate Exam Content Outline §11 Real Estate Calculations

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