Other Mortgage Math Student-2 PDF

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Other Mortgage Math Mortgage Payment Frequency Mortgage Payment Frequency Monthly

# of Payments Per Year 12

Semi-monthly

24

Bi-weekly

26

Accelerated bi-weekly Weekly Accelerated Weekly

26 52 52

Comments monthly payment ÷ 2; twice per month (e.g. 1st and 15th) every 2 weeks; (monthly payment x 12) ÷ 26 monthly payment ÷ 2 (monthly payment x 12) ÷ 52 monthly payment ÷ 4

1. Given a mortgage of $114,000 @ 7% compounded semi-annually for 25 years, calculate the MONTHLY mortgage payment. a) $789.47 b) $798.47 c) $1,596.94 d) $399.24 e) $879.94

Calculate the number of years to pay off the mortgage if it is converted to the following payment frequencies: 2. Calculate the SEMI-MONTHLY payments, i.e., 24 times a year; payments are made 2 times per month on the 1st & 15th every month. monthly payment =semi−monthly mortgage payment 2 a) b) c) d) e)

24.90 20.90 21.90 30.90 28.90

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3. Calculate the BI- WEEKLY payments, i.e., 26 times a year; payments are made every 2 weeks. monthly payment x 12 =bi−weekly mortgage payment 26 a) b) c) d) e)

24.90 20.90 21.90 30.90 28.90

4. Calculate the ACCELERATED BI-WEEKLY payments. monthly payment =accelerated bi−weekly mortgage payment 2 a) b) c) d) e)

24.90 20.54 21.90 30.54 28.54

5. Calculate the WEEKLY payments, i.e., 52 times a year. monthly payment x 12 =weekly mortgage payment 52 a) b) c) d) e)

24.90 24.86 21.90 25.86 28.90

6. Calculate the ACCELERATED WEEKLY payments. monthly payment =accelerated weekly mortgage payment 4 a) b) c) d) e)

24.90 20.90 25.91 30.51 20.51 2

Lump Sum Pre-payment and Interest Costs Melissa and Bosco are looking for a mortgage of $100,000; the interest rate is 6.5% compounded semi-annually. They plan to pay off the mortgage over 20 years. 7. What is the monthly mortgage payment? a) $2,962.00 b) $1,481.00 c) $740.50 d) $370.25 e) None of the above 8. How much interest will they pay over the entire amortization of the loan? a) $77,720.10 b) $87,720.10 c) $97,720.10 d) $107,720.10 e) $117,720.10 9. How much interest is paid after 5 years? a) $20,901.69 b) $29,901.69 c) $26,901.69 d) $26,601.99 e) $29,601.99 10. What is the balance of the loan after 5 years? a) $85,471.67 b) $85,741.67 c) $84,741.67 d) $87,541.67 e) $84,641.67 11. If they make a payment of $10,000 after five years, what is the balance left on the mortgage? a) $85.471.66 b) $75,471.66 c) $65,471.66 d) $55,471.66 e) None of the above

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12. Using the same payment and interest rate from Question 7, calculate how many years it would take to pay off the mortgage. a) 13.20 b) 12.30 c) 11.30 d) 10.20 e) 14.20 13. How many years has it been reduced by? a) 2.10 b) 2.20 c) 2.50 d) 2.70 e) 2.90 14. How much interest will be paid over the amortization of the loan after they make this lump sum payment? Hint: Calculate the interest paid for the first five years (Question 9 above) and then calculate the interest paid over the remainder over the term (Question 11 above). a) $29,901.69 b) $63,741.23 c) $33,839.54 d) $97,580.77 e) $93,642.92 15. How much interest has been saved? a) $13,878.87 b) $13,778.87 c) $13,888.78 d) $13,798.78 e) $13,978.87 16. If they convert the original mortgage payment (calculated in Question 7 above) to an accelerated weekly payment, how many years will it take to pay off the mortgage? Assume PV to be the original amount of $100,000. a) 15.09 b) 16.09 c) 17.09 d) 18.09 e) 19.09

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Interest Adjustment Date (IAD) An interest adjustment occurs when there is a difference between the date you take possession of your home and the date from which your lender calculates your first mortgage payment. Most mortgage lenders set up mortgage payments to be due on the 1st of the month. As a result, an interest adjustment will usually occur when your possession date is any date other than the 1st of the month. For example, if your possession date is September 15th, you will have to make an interest adjustment payment that covers the days between September 15th and the end of September, inclusive. September 15th is known as the interest adjustment date. This is the date on which the actual interest adjustment payment must be made. Beginning on October 1st, you will make your regular monthly mortgage payments. The interest adjustment payment (IAP) is calculated as: IAP=Mortgage Balance x

( ¿ of365days ) x mortgage interest rate

The “# of days” from September 15th to September 30th is 16 days.

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Property Tax Adjustments Many homeowners choose to prepay their property taxes, which are normally due for the calendar year on June 30th. In effect, homeowners who pay their taxes in a lump sum on this date are prepaying for the months of July to December 31st. Questions: Sirius Black owns a home which has annual property taxes of $2,500. Mr. Black prepays his taxes on June 30th. New homeowners Hilda and Herman Sherman take possession of Sirius’ home on March 1, 2008. Since the Sherman’s do not own the home for the entire year, Sirius Black owes the couple property taxes for the months of January and February. This is known as a property tax adjustment. 17. How much is the tax adjustment? a) $416.67 b) $461.67 c) $476.16 d) $467.16 e) $471.67 18. How much is Hilda and Herman’s portion of the tax bill? a) $2,003.33 b) $2,023.33 c) $2,043.33 d) $2,063.33 e) $2,083.33 Assume that the property tax bill on a home you purchase is $2,850. Prior to selling their home, the owners had paid their property taxes annually on June 30th. You take possession of the home on August 1st. 19. Did the seller or the buyer pay the annual tax bill? a) Seller b) Buyer 20. What amount will be owed by the seller or the buyer to the other party? a) $1,817.50 b) $1,718.05 c) $1,187.50 d) $1,175.05 e) $1,575.80

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In situations where the property taxes are paid annually, the following is true. Selling/Purchase Period

Party Responsible for Property Tax Adjustment

January 1st to June 30th

Seller

July 1st to December 31st

Purchaser

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