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Department of Education
National Capital Region
S CHOOLS DIVIS ION OFFICE
MARIK INA CITY

BUSINESS MATHEMATICS
Quarter 1: Module 8
Interest as Applied to Mortgage, Amortization, and/or
Services/Utilities and/or Deposits and Loans

Writer: Maritess S. Zara

Cover Illustrator: Joel J. Estudillo

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 What I Need to Know
This module is designed and written with you in mind. It is here to help you
master the topic Buying and Selling. The scope of this module is to compute
interest specifically as applied to the mortgage, amortization, services/utilities
and deposits and loans.
Anyone can aspire and build their
own business, but one must seriously
consider the capital. You must have enough
capital to put up a business and run the
operations smoothly. If in case you are short
of funds and will need financial support, there
are banks and other private and government
companies, or even friends and relative that
you can go to and borrow money. It is
important to know that for every loan you
make, there is always a corresponding
interest. Are you aware of how the said interest is computed? Is the interest on the
money you will borrow fair and reasonable?

This module is about the lesson Interest Applied to Mortgage.

After going through this module, you are expected to:

1. compute interest applied to mortgage and amortization, services/utilities

and deposits and loans; and,

2. solve problems involving mortgage and amortization.

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 What I Know
Read and answer each item carefully. Choose the letter of the right answer from
the choices given.

1. The transfer of an interest in specific immovable property for the aim of

securing the payment of money advanced as a loan, an existed or future debt
is called __________________________.
B. Mortgage C. Mortgagee
C. Mortgage Deed D. Mortgagor

2. The entity that lends money is called ______________________________.

A. Mortgage C. Mortgagee
B. Mortgage Deed D. Mortgagor

3. Something that is pledged as security for repayment of a loan, to be forfeited

in the event of a default.
A. Collateral C. Interest
B. Down payment D. Loan

For number 4 to 10, refer to the situation given below.

Due to the heavy typhoon that devastated Bicol region, the Lazada family
is forced to avail a loan for the reconstruction of their house. One of the
requirements of the financing company is a 20% down payment of their loan
amounting to Php 350000 that has a 7.5% interest rate, payable for 10 years.

4. How much is the down payment of the Lazada family?

A. Php 65000 C. Php 75000
B. Php 70000 D. Php 80000

5. How much is their initial amount of loan?

A. Php 240000 C. Php 280000
B. Php 260000 D. Php 350000

6. How many months will they pay the loan?

A. 120 C. 300
B. 240 D. 360

7. What is the monthly interest rate of the loan that Lazada family availed of?
A. 0.0000625 or 0.00625% C. 0.00625 or 0.625%
B. 0.000625 or 0.0625% D. 0.0625 or 6.25%

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 8. How much is their monthly installment payment?
A. Php 3023.65 C. Php 3223.65
B. Php 3123.65 D. Php 3323.65

9. How much interest does the financing company charged on the first
amortization of the loan?
A. Php 1750 C. Php 1770
B. Php 1760 D. Php 1780

10. How much goes to the principal on the first amortization of housing loan?
A. Php 1273.65 C. Php 1453.65
B. Php 1363.65 D. Php 1573.65

What’s In
Find the principal, interest, and rate of the following. Round off to 2 decimal
places.

Principal Rate Interest

1. Php 10 000 12%
2. 25 000 15%
3. 130 000 7%
4. 250 000 Php 20 000
5. 150 000 7 500
6. 65 000 4 000
7. 330 000 50 000
8. 10% 5 000
9. 6% 15 000
10. 9% 8 000

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 INTEREST APPLIED TO
Lesson 1 MORTGAGE

What’s New
Mr. Dela Cruz is planning to
buy a house and lot worth Php
550000. He applied for a mortgage in
a financing company that asked for a
20% downpayment.

Guide questions:
1. How much is the down
payment? How much is the
https://search.creativecommons.org/photos/5dced3e9-
mortgage loan? 65ea-4dce-a3f1-e0885e8a0ebd

2. How much will be the monthly amortization of Mr. Dela Cruz at 6%

interest rate, payable for 25 years?

What Is It
You learned from the previous lessons how buying and selling took place and
how to compute profit, loss, break-even points, or the income you will get about
buying and selling. Now you will learn how to compute the interest, monthly
amortization, down payment, and the likes when you avail of a loan in different
lending institutions.

Whenever you want to avail of a loan, you must always consider the
interest that you will be added on it. You must know how to choose the lowest
interest that a lending company will offers and the highest loanable amount
you can get. And to be able to do that, you need to know how that interest is
computed.

There are many different types of loans, and one of the biggest loans is
the mortgage. A mortgage is the transfer of an interest in specific immovable
property for the aim of securing the payment of money advanced as a loan and
existed or future debt. It is usually acquired for a house, house and lot, or
machinery and equipment. The borrower is the mortgagor and the entity that
lends money is the mortgagee. The instrument by which transfer is made is
called ‘Mortgage Deed’.

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 Financing institution usually requires a collateral. Collateral is
something pledged as security for repayment of a loan, to be forfeited in the
event of a default.

Down payment is a certain percent of the purchase price of the loan

and is generally called the buyer’s equity.

Down payment = Purchase price x down payment rate (%)

Example 1: If the selling price of a house and lot is Php 550 000 with a
required 20% down payment, what is the mortgage loan?

Solution:
Down payment = Php 550 000 x 0.20
= Php 110000

Mortgage loan = Purchase price – down payment

= Php 550000 – 110000
= Php 440000

Amortization is the process of spreading out a loan into a series of fixed

payments or simply the installment payment on the loan.

The term of the loan is the total number of payments.

Payment period may be: Frequency of payment

o Annually 1
o Semi-annually 2
o Quarterly 4
o Monthly 12

Example 2: The term of the loan is 25 years and the period of payment is
monthly, which is equivalent to:

Solution: 25 x 12 = 300 is the total number of payments

To compute for the monthly payments, use the formula:

𝑖 𝑥 𝑃 𝑥 (1+𝑖)𝑛
𝐴=
(1+𝑖)𝑛 −1
where: A = monthly payment
P = loan’s initial amount
i = periodic interest rate
n = total number of periods/payments

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Example 3: A bank company offers a car loan to their valued clients
amounting to Php 600000, payable quarterly for 5 years. Appying an interest
rate of 4.6%, what is the quarterly payment of the car?
Solution:
.046
Quarterly interest rate = = 0.0115 𝑜𝑟 1.15%
4
Total number of periods = (5)(4) = 20
Quarterly installment payments:
0.0115 𝑥 600000 𝑥 (1 + 0.0115)20
𝐴=
(1 + 0.0115)20 − 1

A = Php 33753.55213 is the amount of quarterly payment (fixed

amount up to the last term). The quarterly interest rate should not be rounded
off to get the exact quarterly payments. Make sure to follow the rule of PEMDAS
to avoid errors in computing the quarterly payments.

Example 4: If a house and lot is worth Php 550000, with 20%

downpayment, and 30 years to pay, what is the monthly payment for the house
and lot at 6% interest rate?

Solution:
Down payment = (Php 550000)(0.20) = Php 110000
Loan’s initial amount = Php 550000 – Php 110000 = Php 440000
.06
Monthly interest rate = = 0.005 𝑜𝑟 0.5%
12
Total number of periods = (30)(12) = 360

0.005 𝑥 440000 𝑥 (1+0.005)360

𝐴=
(1+0.005)360 −1
A = Php 2638.02 is the amount of monthly payment (fixed amount up
to the last term). The monthly interest rate should not be rounded off to get
the exact monthly payments.

Now if you want to know your monthly payment for the whole duration,
and the amount of money paid to interest and principal which, varies monthly,
we may refer to the amortization table or schedule. The amortization table
shows the monthly payment of the amortization loan and it indicates what part
of the payments go to interest and to principal.

Example 5: Prepare the monthly amortization table based on problem number

4.

Solution: 440000 x 0.005 = 2200 (Start with the initial loan amount.)
To get the principal amount: Principal = monthly payment – interest
= 2638.02 – 2200

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 = 438.02
To get the Balance: Balance = Remaining balance – Principal
= 440000 – 438.02
= 439561.98

Payment Amount Principal Interest Balance

1 2638.02 438.02 2200.00 439561.98
2 2638.02 440.21 2197.81 439121.77
3 2638.02 442.41 2195.61 438679.35
4 2638.02 444.63 2193.40 438234.73
5 2638.02 446.85 2191.17 437787.88
6 2638.02 449.08 2188.94 437338.79
7 2638.02 451.33 2186.69 436887.47
8 2638.02 453.58 2184.44 436433.88
9 2638.02 455.85 2182.17 435978.03
10 2638.02 458.13 2179.89 435519.90

This goes down to the last period of monthly payments. The remaining
balance should be zero, and the total amount of amortization should be equal
to the sum of principal and interest.

356 2638.02 2573.05 64.97 10421.50

357 2638.02 2585.91 52.11 7835.58
358 2638.02 2598.84 39.18 5236.74
359 2638.02 2611.84 26.18 2624.90
360 2638.02 2624.90 13.12 0.00
949688.03 440000.00 509688.03

Therefore, the total amount paid at the end of 30 years (or 360 monthly
installment period) is Php 949688.03 at an inclusive 6% interest rate
amounting to Php 509688.03. Sometimes, other financial charges are applied
in the housing loan or real estate loan like taxes, fire, or mortgage redemption
insurance (MRI) for the security of the mortgagee.

This amortization table can be easily computed using MS Excel in the

computer, or it is usually provided by the lending company. The computation
of interest is also applicable to other loans like services/utilities and even in
deposits and loans. However, there are still different interest rates or
amortization being applied or being used by the banks and other financing
companies like simple interest, compound interest, annuity, etc.

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 What’s More
Solve the following problems:

Mr. Antonio avails of a housing loan from his employer’s company that
offers a 7.5% interest rate payable in 20 years for Php 400 000 with a required
10% down payment.
1. How much is the down payment of Mr. Antonio and the initial
amount of loan?

2. How many months will he pay the loan?

3. What is the monthly interest rate of Mr.Antonio’s housing loan?

4. How much is his monthly installment payment?

5. How much of the first amortization goes to the interest of the

housing loan, and how much goes to principal?

What I Have Learned

Complete the statements below with the correct terms.

1. The transfer of an interest in specific immovable property for the aim

of securing the payment of money advanced as a loan, an existing or
future debt is called ________________________________________________.

2. ____________________ is something pledged as security for repayment of

a loan which is to be forfeited in the event of a default.

3. A certain percent of the purchase price of the loan and is generally

called the buyer’s equity is also known as ___________________________.

4. The entity that borrows money is called ______________________and the

entity that lends money is called ___________________________________.

5. __________________ shows the monthly payment of the amortization

loan indicating what part of the payments goes to interest or goes to
principal.

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 What I Can Do
Performance Task: (10 points)

Let us assume that your father is planning to buy a car amounting to

Php500000, but he has Php 50000 only for the down payment. He decided to avail
of a car loan in his company that offers a 4.5% interest rate payable in 5 years in a
monthly installment period. Prepare the first 5 months of the amortization schedule.

Payment Amount Principal Interest Balance

Rubric for the output:

Needs
Excellent Very Good Fair
Criteria Good (3) improvement
(5) (3) (2)
(1)
Some
Some
entries are A lot of
Completeness Complete Complete entries are
missing entries are
and and very and missing
and missing and
organization organized organized but
output is output is not
of output output output organized
not organized
output
organized

All Committed 4
Correct Committed Committed Committed
computations or more
computation 1 mistake 2 mistakes 3 mistake
are correct mistakes

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 Assessment

Read and answer each item carefully. Choose the letter of the right answer from
the choices given.

1. The entity that borrows money is called ____________________________.

A. Mortgage C. Mortgagee
B. Mortgage Deed D. Mortgagor

2. Something that is pledged as security for repayment of a loan, to be forfeited in

the event of a default.
A. Collateral C. Interest
B. Down payment D. Loan

3. The transfer of an interest in specific immovable property for the aim of securing
the payment of money advanced as a loan, an existing or future debt is called
__________________________.
A. Mortgage C. Mortgagee
B. Mortgage Deed D. Mortgagor

For number 4 to 10, refer to the situation below.

There is an increasing demand for sardines; therefore the manufacturing
firm applied for a loan for additional machinery and equipment to increase the
number of their production. The financing company granted a loan for Php400000
at 4.5% interest rate, payable in 5 years with a 15% down payment.

4. How much is the down payment of the manufacturing firm?

A. Php 50000 C. Php 60000
B. Php 55000 D. Php 65000

5. How much is their initial amount of loan?

A. Php 330000 C. Php 340000
B. Php 335000 D. Php 400000

6. How many months will they pay the loan?

A. 60 C. 96
B. 72 D. 120

7. What is the monthly interest rate of the manufacturing firm?

A. 0.0375 C. 0.000375
B. 0.00375 D. 0.0000375

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8. How much is his monthly installment payment?
A. Php 6038.63 C. Php 6238.63
B. Php 6138.63 D. Php 6338.63

9. How much interest does the financing company charge on the first amortization
of the loan?
A. Php 1175 C. Php 1375
B. Php 1275 D. Php 1475

10. How much goes to the principal on the first amortization of housing loan?
A. Php 4663.63 C. Php 4863.63
B. Php 4763.63 D. Php 5063.63

Additional Activities

Your brother bought a motorcycle worth Php 150 000 with a monthly
installment payment term of 3 years at 5.7% interest rate with a 10% down
payment. Complete the amortization table for the first 10 months below:

Payment Amount Principal Interest Balance

1 3447.39 641.25 131552.61

2 4088.64 3463.76 624.87 128088.85
3 4088.64 3480.21 608.42 124608.64
4 4088.64 3496.74 591.89 121111.89
5 4088.64 3513.35 575.28 117598.54
6 4088.64 3530.04 558.59 114068.50
7 4088.64 3546.81 541.83 110521.69
8 4088.64 3563.66 524.98 106958.03
9 4088.64 3580.59 508.05 103377.44
10 4088.64 3597.59 491.04 99779.85

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 Summative Test
Read and answer each item carefully. Choose the letter of the right answer from
the choices given.

1. The entity that lends money is called ______________________________.

A. Mortgage C. Mortgagee
B. Mortgage Deed D. Mortgagor

2. Something that is pledged as security for repayment of a loan, to be forfeited in

the event of a default.
A. Collateral C. Interest
B. Down payment D. Loan

3. The process of spreading out a loan into a series of fixed payments or simply
the installment payment on the loan.
A. Amortization C. Loan
B. Collateral D. Mortgage

4. It is a certain percent of the purchase price of the loan and is generally called
the buyer’s equity.
A. Collateral C. Interest
B. Down payment D. Loan

5. It shows the monthly payment of the amortization loan indicating what part of
the payments goes to interest or to the principal.
A. Amortization table C. Loan table
B. Interest table D. Mortgage table

6. The following are the common things that a mortgagor borrows EXCEPT:
A. car C. insurance
B. house D. machinery and equipment

7. The following are finance companies that offer loan EXCEPT:

A. Bank C. Lending institution
B. Insurance company D. Pag-ibig Funds

For number 8 to 13, refer to the situation below.

A credit card company offers cash advance to their valued clients amounting
to Php 200000, payable monthly for 3 years, with an interest rate of 3.9%.

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8. How much is the initial amount of loan?
A. Php 140000 C. Php 180000
B. Php 160000 D. Php 200000
9. How many months will the borrower pay the loan in full?
A. 20 C. 36
B. 24 D. 48

10. What is the monthly interest rate the credit card company offers?
A. 0.325 C. 0.00325
B. 0.0325 D. 0.000325

11. How much is the monthly installment payment?

A. Php 5895.90 C. Php 6095.90
B. Php 5995.90 D. Php 6195.90

12. How much interest does the credit card company charge on the first
amortization of the loan?
A. Php 600 C. Php 700
B. Php 650 D. Php 750

13. How much goes to the principal on the first amortization of cash advance?
A. Php 4945.90 C. Php 5145.90
B. Php 5045.90 D. Php 5245.90

For number 14 to 20, refer to the situation below.

A contractor will construct the kitchen area of Delia’s house for Php 120
000. The agreement is that the full amount will be paid in a monthly installment
for 2 years with a 7.5% interest rate, provided she will pay the 20% down payment.

14. How much is the down payment in constructing the kitchen?

A. Php 24000 C. Php 26000
B. Php 25000 D. Php 27000

15. How much is her initial amount of loan?

A. Php 96000 C. Php 98000
B. Php 97000 D. Php 99000

16. How many months can she pay for the loan in full?
A. 20 C. 36
B. 24 D. 48

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17. What is the monthly interest rate of the contractor?
A. 0.625 C. 0.00625
B. 0.0625 D. 0.000625

18. How much is her monthly installment payment?

A. Php 4019.96 C. Php 4219.96
B. Php 4119.96 D. Php 4319.96

19. How much interest does the contractor charged on the first amortization of the
loan?
A. Php 550 C. Php 650
B. Php 600 D. Php 700

20. How much goes to the principal on the first amortization of housing loan?
A. Php 3619.96 C. Php 3819.96
B. Php 3719.96 D. Php 3919.96

References

Mariano, N.L. (2016), Business Mathematics First Edition

Google dictionary

https://www.scribd.com/document/189213448/Mortgage

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 Answer Key

What I Know What’ In What’s More? What I have learned

1) A 1) Php 1200 1) Php 40000 Php 360000 1) Mortgage

2) C 2) Php 3750 2) 240 2) Collateral
3) A 3) Php 9100 3) 0.00625 3) Down payment
4) B 4) 8% 4) Php 2900.14 4) Mortgagor,
5) C 5) 5% 5) Php 2250 Php 650.14 mortgagee
6) A 6) 6.15% 5) Amortization table or
7) C 7) 15.15% schedule
8) D 8) Php 50 000
9) A 9) Php 250 000
10) D 10) Php 88 888.89
What I can Do Assessment Additional Activities

Amount Principal Interest Balance 1) D 6) A 1) 4088.44 6) 114068.50

2) A 7) B 2) 3463.76 7) 110521.69
1)8389.36 6701.86 1687.50 443298.14 3) A 8) D 3) 3480.21 8) 106958.03
2)8389.36 6726.99 1662.37 436571.15 4) C 9) B 4) 591.89 9) 508.05
5) C 10) D 5) 575.28 10) 3597.59
3)8389.36 6752.22 1637.14 429818.93

4)8389.36 6777.54 1611.82 423041.40

5)8389.36 6802.95 1586.41 416238.44

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 Development Team of the Module
Writer: Maritess S. Zara (NHS)
Editors:
Internal Reviewer: Dominador J. Villafria, EPS – Mathematics
External Validator: Kervin Rey G. Torente (ADMU)
Cover Illustrator: Joel J. Estudillo (SNNHS)
Layout Artist:
Management Team:
Sheryll T. Gayola
Assistant Schools Division Superintendent
OIC, Office of the Schools Division Superintendent

Elisa O. Cerveza
Chief, Curriculum Implementation Division
OIC, Office of the Assistant Schools Division Superintendent

Dominador J. Villafria
Education Program Supervisor - Mathematics

Ivy Coney A. Gamatero

Education Program Supervisor – Learning Resource Management Section

For inquiries or feedback, please write or call:

Schools Division Office- Marikina City

Email Address: sdo.marikina@deped.gov.ph

191 Shoe Ave., Sta. Elena, Marikina City, 1800, Philippines

Telefax: (02) 8682-2472 / 8682-3989

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