Quick, you want to know what your mortgage payment will be on a $200,000 house at 6% on a 30 year mortgage. This is quite easy using a shortcut that I call a mortgage factor.
Here’s how it works:Take the mortgage amount, drop the thousands (in this case 200). Multiply this amount by the interest rate (in this case 6). And there you go: (6 * 200 = $1200/month). Believe it or not this will calculate it correctly within a couple of dollars! It also works in reverse, if you only want to spend $1200/month what will be the maximum amount you can borrow? Simply divide 1200/6, and you get 200 (multiply this by 1,000).
This also works for rates of 5% and 7%, but it is less accurate. (Multiplying by 7 will give you a payment that actually is closer to 7.5%; while multiplying by 5 will give you an interest rate that it closer to 4.5%). It can still be useful to give you a ballpark figure.