|
|
|
Mortgages
|
|
|
|
Team members |
|
Nikita Iyer
|
|
Overview |
|
Mortgage can be defined as
a tool used to create a lien on real estate by
contract. It is used as a method by which
residential or commercial property is bought by
individuals or businesses without paying the
full value upfront.
The borrower (also called
the mortgagor) uses a mortgage to pledge real
property to the lender (also called the
mortgagee) as security against the debt for the
rest of the value of the property. All mortgages
can be classified into two categories: those
that carry fixed interest rates and those whose
rates change during the course of the loan on a
periodic schedule as mutually agreed upon by
mortgagor and the mortgage.
Types of problem solving
questions that could be based on the mortgage
subject are:
1)
Estimating the monthly
payment for a given amortization period.
2)
Calculating of total
interest paid on the mortgage.
|
|
Study Tips,
Methods and or Advice |
|
The above
problems could be easily solved by using the
Canadian mortgage formula which are compounded
semi-annually by law:
Monthly payment
(R) =
Where:
P = Principal outstanding
=
monthly interest rate
n = amortization
period (# of months)
|
|
Sample
Questions and complete solutions |
|
|
Questions |
Complete Solutions |
|
1. Natasha borrows
$100.000 to buy a home. The bank offers
her a 25 – year mortgage at 8%. What is
the monthly mortgage payment?
|
R = ?
P=100,000
i = (1.04)1/6
-1 = 0.00668980
n = 25 x 12 = 300
R=
R=(100,000)
(0.00668980)
1 –
-300
R = $773.65
Natasha’s monthly
mortgage payment is $773.65. |
|
2. Paul borrows
$200,000. The bank offers him a 15 years
mortgage at 6%. His monthly mortgage
payments is $1,692.60. Calculate the
total interest payable on the mortgage. |
I (Total Interest)
= ?
P=200,000
n=15 x 12=180
R=1,692.60
I = (R x n) – P
=(1692.60 x 180)
– 200,000
=$104,668
The total interest
payable on the mortgage is $104,668. |
|
3. George needs a
mortgage of $125,000. The bank offers
him a 20 years mortgage at 5%. What is
his monthly mortgage payment?
|
R = ?
P=125,000
i = (1.025)1/6
-1 = 0.0042065670
n = 20 x 12 = 240
R=
R=(125,000)
(0.0042065670)
1 –
-240
R = $828.25
George’s monthly
mortgage payment is $828.25. |
|
4. Michael had
borrowed $175,000 for a house on a
30-years mortgage at 8.5%. His monthly
payment is $1,348.20. Calculate the
total interest payable by Michael
rounding off to the nearest $.
|
I (Total Interest)
= ?
P=175,000
n=30 x 12=360
R=1,348.20
I = (R x n) – P
=(1,348.60 x
360) – 175,000
=$310,495.99
The total interest
payable on the mortgage is $310,496. |
|
|
Extra
Practice Questions and Answers |
|
Extra Practice Questions |
Answers |
|
1. Tom bought a
home and needs a mortgage of $ 150,000.
The bank offers an interest rate of
7.5%. Calculate the monthly payment for
20 years amortization period.
|
$ 1,211.47 |
|
2. Darek bought a
home and borrowed $250,000. His monthly
payment is $1450.00 on a 25 years
amortization period. Calculate the total
interest payable on the mortgage.
|
$185,000 |
|
3. Nancy needs a
mortgage of $175,000/ The bank offers
her a 30 years mortgage at 8.5%.
Calculate her monthly mortgage payment.
|
$1,348.20 |
|
4. Peter bought a
home and borrowed $150,000 on a 10 year
mortgage at 6%. His monthly mortgage
payment is $1,668.71. Calculate the
total interest payable on the mortgage.
|
$50,245.20
|
|
5.Bob needs a
mortgage of $200,000. The bank offers
him a 15 years mortgage at 6%. Calculate
his monthly mortgage payment.
|
$1,692.60 |
|
|
Self
Reflection |
|
Personal Reflection -
Nikita
The thing I liked about
this topic was that I found it very challenging
while making the project on the computer.
My research on this
topic helped me to clearly understand how the
whole mortgage system works and how monthly
mortgage payments are calculated. I found the
formula used to calculate the mortgage payment
very complex because it involved difficult
calculations where I needed to use a calculator
at all times.
Now if I need to buy a
house, I exactly know what to do since I have a
better knowledge on mortgage.
I am happy with the web
page as it breaks the page into different
section that deals with a specific topic and
allows for easy navigation to the user.
|
|
|
|
|
|
