Contemporary Mathematics

Mathematics

Quiz 14 :Mortgages

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A chart that shows the month-by-month breakdown of each mortgage payment into interest and principal is known as a(n) __________ schedule.
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An amortization schedule is a chart that shows the status of the mortgage loan after each payment. The schedule illustrates month how much of the mortgage payment is interest and how much is left to reduce to principal. The schedule also shows the outstanding balance of the loan after each payment.
Consider an example; prepare a amortization schedule for the first three months of the
mortgage at
for 30 years.
At first, calculate the monthly payment using the three steps
1. First find the number of
financed
2. Using table locate the table factor, monthly payment per
financed.
The entry in the above table for
for 30-years is
.
3. Now, calculate the monthly payment
Therefore, the monthly payment is
.
Next, use this monthly payment to complete the amortization schedule.
Month 1:
1. Calculate the amount of interest for the current month using
Where,
is the current outstanding balance of the loan,
is the annual Interest rate and
is
. So,
2. Calculate the portion of payment used to reduce principal by using the formula below
3. Calculate the outstanding balance of the mortgage loan by using the formula below
Now, repeat the steps 1, 2 and 3 for two more payments
Month 2:
1.
2.
3.
4.
1.
2.
3.
Therefore, the amortization schedule is
A chart that shows the month-by-month breakdown of each mortgage payment into interest and principal is known as a(n) amortization schedule.

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For the following second mortgage applications, calculate the percentage of appraised value and the potential credit.
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Consider appraised value is
, lender percentage is
and balance of first mortgage is
.
Step 1. First find the percentage of appraised value
Step 2. Next, find the potential amount of credit available
Therefore,

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Mortgage __________ points are an extra charge frequently added to the cost of a mortgage.
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Extra charges known as mortgage discount points are frequently added to the cost of a loan as a rate adjustment factor. This allows lenders to increase their yield without showing an increase in the mortgage interest rate. Each discount points is equal to
of the amount financed.
Consider an example, suppose a person is purchasing a
home. The down pay is
, and the balance will be financed with a 25-year fixed-rate mortgage at
and
discount points.
Here,
And,
Extra charges i.e. discount points the person has to give to the lender is
Mortgage discount points are an extra charge frequently added to the cost of a mortgage.

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For the following second mortgage applications, calculate the percentage of appraised value and the potential credit.
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A(n) __________ is a loan in which real property is used as security for a debt.
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Use Table 14-1 to calculate the monthly principal and interest and calculate the monthly PITI for the following mortgages.
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You are one of the branch managers of the Insignia Bank. Today two loan applications were submitted to your office. Calculate the requested information for each loan.
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A(n) __________ account is a bank account used by mortgage lenders to accumulate next year's property taxes and hazard insurance.
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Suzanne Arthurs purchased a home with a \$146,100 mortgage at 6.5% for 30 years. Calculate the monthly payment and prepare an amortization schedule for the first three months of Suzanne's loan.
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The official document representing the right of ownership of real property is known as the __________ or the __________.
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Land, including permanent improvements on that land, is known as __________.
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For the following mortgage applications, calculate the housing expense ratio and the total expense ratio.
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List four mortgage loan closing costs.
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You are one of the branch managers of the Insignia Bank. Today two loan applications were submitted to your office. Calculate the requested information for each loan.
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Today most mortgage payments include four parts, abbreviated PITI. Name these parts.
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For the following mortgage applications, calculate the housing expense ratio and the total expense ratio.
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Use Table 14-1 to calculate the monthly principal and interest and calculate the monthly PITI for the following mortgages.
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A mortgage in which the interest rate changes periodically, usually in relation to a predetermined economic index, is known as a(n) __________ rate mortgage.
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