Calculating Mortgage Payments

A set of flashcards covering key terms and concepts related to mortgage calculations, payment structures, and loan types.

PMT Formula

PMT = PV(i) / (1 - (1 + i)^-N) where PV is present value, i is periodic interest rate, and N is number of payments.

PITI

PITI stands for monthly principal, interest, taxes, and insurance.

Escrow Account

An account held by the lender to pay real estate taxes and homeowners insurance on behalf of the borrower.

Amortization Schedule

A table that outlines each monthly payment's allocation between principal and interest.

Biweekly Mortgage

A mortgage that requires payments every two weeks instead of monthly.

Private Mortgage Insurance (PMI)

Insurance required by lenders if the borrower does not put at least 20% down on a home.

Interest Rate

The percentage at which interest is charged on a loan.

Principal Reduction

The portion of the monthly payment that reduces the outstanding principal balance of the loan.

Loan Types

Various mortgage options including fixed-rate, adjustable-rate, and graduated payment mortgages.

Total Interest Cost

The total amount of interest paid over the life of the loan.

total of all monthly payments - amount of mortgage

Periodic Interest Rate

Interest rate charged on a loan over a specific time period, usually expressed as a monthly rate.

Monthly Payment (PMT)

The required amount paid each month to reduce the mortgage over the specified term.

Debt-to-Income Ratio

A measure that compares a borrower's total monthly debt payments to their total monthly income.

Closing Costs

Fees and expenses, beyond the price of the property, incurred by buyers and sellers during the closing of a real estate transaction.

Points

One-time fees paid to lenders, often used to reduce the interest rate on a mortgage.

Total Cost of Interest

The total amount of interest paid over the life of the loan calculated as total payments minus the loan amount.

Cash-Out Refinance

A refinancing option that allows homeowners to borrow against the equity in their home.

Negative Amortization

A situation where the loan balance increases despite monthly payments due to insufficient payments covering interest.

Fixed-Rate Mortgage

A mortgage where the interest rate remains the same throughout the term of the loan.

PMT Formula

PMT = \frac{PV \cdot i}{1 - (1 + i)^{-N}} where PV is present value, i is periodic interest rate, and N is number of payments.

PITI

PITI stands for monthly principal, interest, taxes, and insurance.

Escrow Account

An account held by the lender to pay real estate taxes and homeowners insurance on behalf of the borrower.

Amortization Schedule

A table that outlines each monthly payment's allocation between principal and interest.

Biweekly Mortgage

A mortgage that requires payments every two weeks instead of monthly.

Private Mortgage Insurance (PMI)

Insurance required by lenders if the borrower does not put at least 20\% down on a home.

Interest Rate

The percentage at which interest is charged on a loan.

Principal Reduction

The portion of the monthly payment that reduces the outstanding principal balance of the loan.

Loan Types

Various mortgage options including fixed-rate, adjustable-rate, and graduated payment mortgages.

Total Interest Cost

The total amount of interest paid over the life of the loan.

Periodic Interest Rate

Interest rate charged on a loan over a specific time period, usually expressed as a monthly rate.

Monthly Payment (PMT)

The required amount paid each month to reduce the mortgage over the specified term.

Debt-to-Income Ratio (DTI)

A measure that compares a borrower's total monthly debt payments to their total monthly income. The formula is: DTI = \frac{Total \ Monthly \ Debt \ Payments}{Gross \ Monthly \ Income} \times 100\%

Closing Costs

Fees and expenses, beyond the price of the property, incurred by buyers and sellers during the closing of a real estate transaction.

Points

One-time fees paid to lenders, often used to reduce the interest rate on a mortgage.

Total Cost of Interest Formula

The total amount of interest paid over the life of the loan is calculated as: (Total \ Interest \ Cost) = (Monthly \ Payment \times Number \ of \ Payments) - Original \ Loan \ Amount

Cash-Out Refinance

A refinancing option that allows homeowners to borrow against the equity in their home.

Negative Amortization

A situation where the loan balance increases despite monthly payments due to insufficient payments covering interest.

Fixed-Rate Mortgage

A mortgage where the interest rate remains the same throughout the term of the loan.

Amount financed

cash price - down payment

Total finance charge

total of all monthly payments - amount financed

deferred payment price

total of all monthly payments + down payment

APR BY FORMULA

APR = 72 x I/ 3P (N+1) +I (N-1)

I = finance charge on loan

P = Amount financed

N = Number of months of the loan

MONTHLY PAYMENT BY FORMULA

PV(i)/ 1 - 1/(1+i)^N

N = number of payments

i = periodic interest rate (%/12)

PV = loan amount

AMORTIZATION SCHEDULE

I = P x R x T