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Mortgage

The document explains the concept of a mortgage, detailing its function as a home loan and the implications of defaulting on payments. It covers amortization, including how payments are structured over time, and provides formulas for calculating down payments and mortgage loans. Additionally, it includes sample problems for calculating down payments and monthly payments for loans, along with exercises for the reader to complete.

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6 views3 pages

Mortgage

The document explains the concept of a mortgage, detailing its function as a home loan and the implications of defaulting on payments. It covers amortization, including how payments are structured over time, and provides formulas for calculating down payments and mortgage loans. Additionally, it includes sample problems for calculating down payments and monthly payments for loans, along with exercises for the reader to complete.

Uploaded by

2rs2jsq2zw
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Mortgage

is more commonly known as “home loan” or the conditional


borrowing of money to buy a house. If the borrower fails to pay for the
monthly mortgage payment, the lender of the money still has the authority
to take back the property and sell it to prospective buyers to raise money
for the unpaid mortgage.

Amortization is the repayment of a loan over a course of time. Each


payment mainly consists of the principal amount borrowed and the interest
(of the mortgage), where the principal is the loan balance that is still
outstanding. The more the principal is paid up, the less interest is due. That
is, the interest portion for each month’s payment decreases and the
principal portion increases.

Term of a loan
-total number of payments
Amortization Table
-is a table or chart that shows the installment payment schedule for the period of
payment.

Down Payment and Mortgage Loan


Formula
Down payment = Purchase price × Down payment %

Mortgage loan = Purchase price – Down payment


Sample problem:
Assume that you wish to purchase a secondhand car worth ₱312,500 and the seller
requires a 20% down payment.

Down payment = Purchase price × Down payment %


= ₱312,500 × 20%
= ₱62,500

Mortgage loan = Purchase price – Down payment


= ₱312,500 – ₱62,500
= ₱250,000
Term of the Loan: Total Number of Payments

Monthly Payment:

where A – monthly payment


P – loan’s initial amount
i – monthly interest rate
n – total number of payments

Sample problem:
Loan amount: ₱250,000 Number of payment: 360 Assume that the bank will
charge you 5% annually

Your Turn . . .
Direction: Write you answer in 1 whole sheet of paper, to be pass on Friday together
with your assignment.

1. 1. Assume that you wish to purchase a secondhand car worth ₱312,500 and the
seller requires a 20% down payment.

2. You wish to purchase a house and lot worth 2,205,600 and the seller requires a
20% down payment. Then you will loan the balance from the bank that charges
7.5% annual interest rate to be paid for 20 years.
1. How much is your down payment?
2.How much is your mortgage loan?
3.How much is your monthly amortization?
4. How much is the total interest of your loan?

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