Because mortgage loans are usually repaid in installments, the combination of mortgage loans and self-owned funds usually does not use mortgage interest rates and self-owned funds to calculate the rate of return on real estate, but uses mortgage loan constants and capitalization rate of self-owned funds to calculate the comprehensive capitalization rate. Specifically, the comprehensive capitalization rate is the weighted average of the mortgage loan constant and the capitalization rate of its own capital, that is,
RO=M×RM+( 1-M)×RE
In which: RO-comprehensive capitalization rate;
M- loan-to-value ratio, that is, the ratio of mortgage loan amount to real estate value, is generally between 60 and 90;
RM- mortgage loan constant;
Capitalization rate of self-owned funds.
In the above formula, the mortgage loan constant generally adopts the annual mortgage loan constant, that is, the ratio of the annual repayment amount (principal) to the mortgage loan amount (mortgage loan principal). If the mortgage loan is repaid monthly, the annual mortgage loan constant is the monthly repayment amount multiplied by 12 and divided by the mortgage loan amount; Or multiply the monthly mortgage constant (the ratio of monthly repayment amount to mortgage amount) by 12. In the case of equal repayment of principal and interest by installments, the calculation formula of mortgage loan constant is
Where: RM- mortgage loan constant;
Ym- mortgage yield, that is, mortgage interest rate (I);
Term of mortgage loan.
Capitalization rate of self-owned funds is the ratio of net income (pre-tax net cash flow) after deducting mortgage principal and interest to the amount of self-owned funds. It is usually the ratio of pre-tax cash flow to the amount of self-owned funds in the next year, which can be obtained by dividing the pre-tax net cash flow of comparable real estate by self-owned funds.
The comprehensive capitalization rate must meet both the lender's requirements for mortgage loan constants and the investor's requirements for pre-tax net cash flow of self-owned funds. The following points help to understand the formula of mortgage loan and self-owned fund portfolio:
(1) Buying real estate can be regarded as an investment behavior, with the real estate price as the investment amount and the real estate net income as the investment income.
(2) The sources of funds for purchasing real estate can be divided into mortgage loans and self-owned funds, so there are:
Mortgage amount+self-owned funds = house price
(3) the income of real estate is shared by these two parts of funds accordingly, namely
Real estate net income = mortgage income+self-owned fund income.
(4) So there are:
Real estate price × comprehensive capitalization rate = mortgage loan amount × mortgage loan constant+amount of self-owned funds × capitalization rate of self-owned funds.
(5) Then:
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