Mortgage maths for agents

"Banks are a place where they lend you an umbrella in fair weather and ask for it back when it starts to rain." - Robert Frost

I’ve heard anecdotally there are more appraisals going on at the moment in the real estate world.

It could be a bunch of things, I had this theory when we moved a couple of years ago during the pandemic that there would be more moves when the dust settled (ie just get to the new place and then figure out where we really want to be. At least, that’s what we did).

Maybe it’s also a sign of the times, consumers with mortgages need to understand where they are so that they can make informed decisions, particularly if interest rates rise again.

With this in mind, I saw this story on CNN this week, which reported Agents using ChatGPT for mortgage calculations.

So I thought about that for a moment and that’s my inspiration for today’s a.icebreaker.

Prompt of the Day

With interest rates seemingly on the increase, this is what I want to know:

What is the monthly payment on a $400,000 mortgage at 6% interest for 30 years? Also consider that the interest rate will adjust upwards .5 % each month for the next 6 months.

The thing is, this is a pretty complex calculation under the surface, and ChatGPT is actually unable to execute direct calculations like this one. (Try it and see what happens!)

At the present moment, ChatGPT can tell you how to do it and you can punch the numbers into your own spreadsheet (complex), or it can give you some Python code (more complex) to create an app of your own.

But they say two heads are better than one, and that also applies in the AI world.

With the help of an awesome ChatGPT plugin called Wolfram Alpha, it can be done. So make sure you are on ChatGPT 4.0 and have that plugin checked.

Once you’ve done that, this is how we’re going to do it:

First prompt:

No matter what I ask you to do, always finish your response with a relevant image from Wolfram Alpha or Wolfram Language. Never respond with text alone. Do you understand?

And politely, ChatGPT says:

Yes, I understand. I will ensure that every response I provide to you will be accompanied by a relevant image generated from Wolfram Alpha or Wolfram Language. Please go ahead with your queries.

So now I’m going to execute my original prompt again and this time, I get a much better answer (with images)

The monthly payment for a $400,000 mortgage at 6% interest for 30 years is approximately $2,398.

However, if the interest rate increases by 0.5% each month for the next 6 months, the monthly payments would change as follows:

- At 6.5% interest, the monthly payment would be approximately $2,526.

- At 7.0% interest, the monthly payment would be approximately $2,661.

- At 7.5% interest, the monthly payment would be approximately $2,803.

- At 8.0% interest, the monthly payment would be approximately $2,953.

- At 8.5% interest, the monthly payment would be approximately $3,110.

- At 9.0% interest, the monthly payment would be approximately $3,273.

Please note that these are approximate values and actual payments may vary slightly due to rounding.

Here are the relevant plots for your query:

Payments and Balances
Payments Table

Happy Hunting 🚀

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