Before you read
Test yourself first: 5 questions
Question 1 of 5
A buyer pays $2,100 monthly interest-only on a 7% loan. The loan amount is:
Answer: B. Annual interest = 2,100 × 12 = $25,200. Principal = 25,200 ÷ 0.07 = $360,000.
Question 2 of 5
What is the annual simple interest on a $120,000 loan at 5%?
Answer: A. $120,000 × 0.05 = $6,000 per year.
Question 3 of 5
On a $100,000 loan at 6% annual interest, how much of the first monthly payment is interest?
Answer: A. Annual interest = $6,000; monthly = $6,000 ÷ 12 = $500.
Question 4 of 5
A buyer borrows $200,000 at 6% simple annual interest. How much interest accrues in one year?
Answer: C. Simple annual interest equals principal times rate: $200,000 x 0.06 = $12,000.
Question 5 of 5
A loan of $150,000 carries 5% simple annual interest. What is the interest portion of one monthly payment in the first month?
Answer: A. Annual interest is $150,000 x 0.05 = $7,500; divided by 12 months equals $625.
Keep the streak going with more questions like these, each with a full rationale.
What you need to know
Forward: $150,000 at 7% for one month → $150,000 × 0.07 ÷ 12 = $875. Backward — the tested direction: a $875 monthly interest payment at 7% implies a balance of $875 × 12 ÷ 0.07 = $150,000; a $150,000 loan paying $900/month interest-only implies a rate of $900 × 12 ÷ $150,000 = 7.2%. Amortized payments split: month one interest = balance × rate ÷ 12; principal = payment − interest; next month recalculates on the slightly smaller balance. The exam rarely asks more than two months deep — just iterate carefully.
Interest Problems Forward & Backward: FAQs
Is Interest Problems Forward & Backward on the real estate exam?
Yes. Real Estate Math is a scored domain on the real estate licensing exam, and this topic appears in the national portion.
Is this cheat sheet free?
Yes — every page on Cinna RE's resource library is free to read, print and share. The app adds practice questions, mock exams and a readiness score.
