How to calculate Average Mortgage Balance during home sale
I had 2 mortgages in 2024 not due to a refinance or sale but rather due to carrying a mortgage for 2 properties. 1 mortgage was a new mortgage for a newly purchased primary home. The other mortgage was for our previous primary home which was eventually sold in 2024.
What is the recommended way to calculate the average mortgage when carrying 2 mortgages only during the time when the previous primary home was up for sale?
Jan 2024 - Sept 2024 - Mortgage #1
Aug 2024 - present : Mortgage #2
You'd think this was not an uncommon scenario. Thanks!
Comments
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Dear ParanoidAndroid,
Thanks for the question. To calculate the average balance for just the 2 months (August and September) that you had the 2 loans, you would add the balance of the 2 loans together for each month and then divide by 2.
For example, loan 1 balance in August was $500,000. Loan 2 balance in August was $700,000. 500,000+700,000=1,200,000. 1,200,000/2=600,000. 600,000 is the average balance for August.
Loan 1 balance in September was $495,000. Loan 2 balance in September was $690,000. 495,000+690,000 = 1,185,000. 1,185,000/2 = 592,500. 592,500 is the average balance for September.
To find the average of the 2 months combined, you would add 600,000+592,500=1,192,500. 1,192,500/2=596,250. 596,250 is the average balance for August and September combined.
If you had to do this for the whole year, it would look something like this:
Month
Mortgage 1
Mortgage 2
Total
Jan
$535,000.00
$0.00
$535,000.00
Feb
$530,000.00
$0.00
$530,000.00
March
$525,000.00
$0.00
$525,000.00
April
$520,000.00
$0.00
$520,000.00
May
$515,000.00
$0.00
$515,000.00
June
$510,000.00
$0.00
$510,000.00
July
$505,000.00
$0.00
$505,000.00
Aug
$500,000.00
$700,000.00
$1,200,000.00
Sept
$495,000.00
$690,000.00
$1,185,000.00
Oct
$0.00
$680,000.00
$680,000.00
Nov
$0.00
$670,000.00
$670,000.00
Dec
$0.00
$660,000.00
$660,000.00
You would then add up the totals, which would equal $8,035,000, and then divide that by 12, which would equal $669,583. $669,583 is the average balance for the year.
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