Busmath Chapter 9: Mortgage and Amortization

Mortgage loan

when you use your property as collateral for a loan from a financial institutions.

Down payment

is usually a certain percent of the purchase price of the property. (buyer’s equity)

Amortization

term used for the installment payment on the loan.

Amortization table

is the schedule prepared showing the installment payment

Down payment Formula

Purchase price x Rate of down payment

Mortgage Loan Formula

Purchase price - Down payment

Monthly Payment Formula

A (MONTLY PAYMENT)

Monthly payment

P (MONTLY PAYMENT)

Loan’s initial amount

i (MONTLY PAYMENT)

Monthly interest rate

n (MONTLY PAYMENT)

Total number of payments

Monthly rate Formula

Annual rate ÷ 12 months

Term of loan Formula

Number of years x 12 months

Total Payment Formula

Monthly payment x term of loan

Total Interest Formula

Total payment - Mortgage loan

mortgage

probably the biggest loan one can have. It is usually obtained for a house, a house and lot, or for a machinery or equipment.

loan

a thing that is borrowed, especially money that is expected to be paid back with interest.

amortization schedule

lists each loan payment until the loan is paid off, the amount of each payment that is for the interest, the amount of each payment that is for the principal and the balance after each loan payment.