Buying and Selling - Mortgages

Buying and Selling:
Mortgages
Mortgage
 A mortgage is probably the biggest form of loan one can have. It
is usually obtained for a house, a house and lot, or for machinery or
equipment.
Mortgage
 Today, the internet have what we call as amortization calculator
that helps would-be-home owners.
◦ They just enter the location, the amount of the loan, the terms, and the APR,
and it will give the amount of their monthly payment, the total of the payments
for the entire terms of the loan, and pay-off date or the date that they will have
to fully-paid the loan.
◦ In addition, there are sites that let you print your own amortization schedule.
Down Payment and Mortgage Loan
 Mortgage loan is when you use your property as collateral for a
loan from a financial institution. For most installment purchases, a
down payment is generally required. It is usually a certain percent
of the purchase price.
 At the most basic level, a property mortgage involves payment
of the purchase price for the property and interest on the loan.
 The down payment is usually a certain percent of the purchase
price of the property. This is generally called the buyer’s equity.
 Assume that you wish to purchase a secondhand car worth
₱321,500.00 and the seller requires a 20% down payment.
 To compute for the down payment:
Down payment = Purchase price x Down Payment %

= ₱321,500.00 x 20%
= ₱62,500.00
 Therefore, if you pay the 20% down payment, the amount of the
mortgage loan would be the balance after the down payment has
been deducted from the purchase price, which in our example
would be:
Mortgage Loan = Purchase Price - Down Payment

= ₱321,500.00 - ₱62,500.00
= ₱250,000.00
Term of the Loan: Total Number of Payments
 The installment payment on the loan is termed as amortization.
 The schedule prepared showing the installment payments for the
period of payment(called the term of the loan) is called an
amortization table.
◦ In our example, assume that you have to make one payment per month for 30
years. Thirty years is the term of the loan. Thirty years multiplied by 12
months per year will give you 360, meaning, you have to make 360 monthly
payments to fully pay your loan.
Monthly Payment
 If there were no interest rate, determining your monthly rate would
be simple. Divide the loan amount by the number of payments
(₱250,000.00/360 = ₱649.44).
 However, the bank has to make money so the bank will collect
interest.
 Assume that the bank will charge you 5% annually. The 5% is what
is termed as the annual percentage rate or APR.
 Since you are to make monthly payments, we have to convert the
5% APR to a monthly rate. We divide 5% by 12 to get 0.41667%
(5%/12 = 0.416%).
Monthly Payment
 To determine the monthly payment, we use the following formula:
where: A = the monthly payment

P = the loan’s initial amount
i = the monthly interest rate
n = the total number of payment
Monthly Payment
 There are many free websites and calculators that create
amortization schedules automatically.
 An amortization schedule is a table or chart showing each
monthly payment on an amortizing loan indicating how much of
each payment goes to interest and how much goes to principal.
 As the amount that goes to interest decreases as payment is made,
the amount goes to the principal increases.
 The amortization table generally applies to fixed
mortgages/loans.
Monthly Payment
 Taking our example, a secondhand car is worth ₱312,500.00 with a
20% down payment.
 Your bank agreed to provide you with a ₱250,000.00 mortgage at a
fixed interest rate of 5% for 30 years.
◦ What is your monthly payment?
◦ How much money are you paying toward interest and principal each year?
Monthly Payment
 The amount of the loan is ₱250,000.00, which is the principal. If we
pay ₱1,342.05 for 360 months, that will total to ₱483,138.
 Therefore, if we deduct the amount of the loan from the total
payments (₱483,138 - ₱250,000), the amount of the interest that
you will have to pay for the entire term of the loan would be
₱233,138.
 Note that it is very expensive to get a mortgage loan because, as
you can see, even if the interest is only 5% per month, you pay
almost double the amount of your loan.
Questions???
13

Buying and Selling - Mortgages

Uploaded by

Copyright:

Available Formats

Buying and Selling - Mortgages

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Buying and Selling - Mortgages

Uploaded by

Copyright:

Available Formats

Buying and Selling:

Down payment = Purchase price x Down Payment %

Mortgage Loan = Purchase Price - Down Payment

where: A = the monthly payment

You might also like

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.