Ch. 22 - Real Estate Math

Question 1

To determine the _______, you would divide the cost of the building by the number of years of its economic life and the result is the annual ______ amount.

Answer 1

Depreciation

Question 2

______ is the amount that a property increases over time due to inflation, supply and demand, capital improvements and other factors.

Answer 2

Appreciation

Multiply the property’s original value by the percent of appreciation.
Add the result to the original value = Appreciation

Question 3

These charges are designed to offset any losses the lender might suffer when selling the loan to the secondary mortgage market. ______ _____ are a means of raising the effective interest rate of the loan.

Answer 3

Discount points
The rule of thumb is 1/8 percent for each discount point.

ex. 4 points x 1/8 percent = 4/8 = .50 percent
7. 25 + .50 = 7.75 percent

Question 4

_____ represent prepaid interest and the lender charges them to get additional income on the loan. They are paid at closing and are usually equal to 1 percent of the loan amount.

Answer 4

points

Question 5

An acre of land has ______ square feet

Answer 5

43,560

Question 6

A hectare is a metric measurement. It is equal to 10,000 square meters or approximately ___ acres.

Answer 6

2.47 acres

Question 7

How do you find a homeowner’s income ratio?

Answer 7

Divide total house payment by gross monthly income

Question 8

How do you find a homeowner’s debt ratio?

Answer 8

Divide total monthly debt by gross monthly income