math
simple interest
Simple interest is interest calculated only on the original principal, not on interest already earned or charged. The formula is interest equals principal times rate times time, with time expressed in years. Real estate exam math uses simple interest for problems such as interest on a loan for part of a year, accrued interest at closing, and the first month's interest on a mortgage.
- Exam tip
- Convert time to years: 6 months is 0.5. For monthly interest on a mortgage, divide annual interest by 12.
- Example
- A $10,000 loan at 6% for 2 years earns 10,000 x 0.06 x 2 = $1,200 in simple interest.
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Last verified: 2026-10-23