CHP 59 - Finance Flashcards
1 Point =
1% of the loan amount
Fee Paid =
Loan amount X Points
1 Point charged raises lenders yield by
.125%
8 Points charged rasises lenders yield by
1%
Payment =
Principal X Rate
Interest-only loan calculation
Total interest = Loan amount x Rate x Term in years
Amortized loan
Total interest = (Monthly PI payment x 12 x term) - Loan amount
Loan Amortization
Month 1: Principal paid = Monthly payment - (Loan amount x Rate ÷ 12)
Month 2: New loan amount = (Previous month principal - Principal paid)
Principal paid = Monthly payment - (New loan amount x Rate ÷ 12)
Monthly Payment =
Loan Amount/1000 * Loan Constant
Loan Constant =
Monthly Payment/Loan Amount * 1000
Loan Amount =
Monthly Payment/Loan Constant * 1000
Loan to Value Ratio
loan amount/price of home
Price/Value (LTV) =
Loan amount / %
Loan Amount =
home price * %
Income Ratio Qualification
Monthly PI =
Income ratio * Monthly Gross income
A lender uses a 28% income ratio for the PI payment. A borrower grosses $30,000 per year. What monthly PI payment can the borrower afford?
Monthly PI payment = ($30,000 ÷ 12) x .28 = $700
How much can the borrower borrow if the loan constant is 6.3207? (See also- loan constants)
Loan amount = ($700 ÷ 6.3207) x 1,000 = $110,747.22
Debt Ratio Qualification
Housing Expense =
(Monthly gross income x Debt ratio) - Other debt payments
Debt Ratio =
Housing Expense + Other Debt pymnt / Monthly Gross Income
A lender uses a 36% debt ratio. A borrower earns $30,000 / year and has monthly non-housing debt payments of $500. What housing payment can she afford?
Housing expense = ($30,000 ÷ 12 x .36) - 500 = ($900 - 500) = $400
Jackie obtains a 60% LTV loan on her new $250,000 home with an annual interest rate of 5.5%. What is the first month’s interest payment?
688
A borrower has a $200,000 mortgage, amortized over 30 years, and priced at a fixed 5.5% rate. What is the approximate monthly payment for just principal and interest?
A $200,000 mortgage priced at 5.5% over 30 years is approximately $1,135 per month (principal and interest only; it does not include property taxes and insurance). In a financial or mortgage calculator, the formula goes something like as follows: $200,000 PV (Present Value), 5.5% monthly interest, 30 year (or 360 month term), Zero FV (Future Value) because the loan fully pays off over the life of the loan, and enter PMT (Payment) to arrive at close to $1,135 per month.
A borrower has a monthly payment of $1,980 on a loan with a monthly constant of 6.45. What is the loan amount (to the nearest hundred)?
The loan amount is $307,000.
(L/1000)x6.45=$1,980. L= 306.9767 x 1000 = $306,976.
Christy has monthly loan payments of $1,200. Her loan is for $210,000 @ 6.1% interest. How much of her first payment goes towards principal?
$132.50 of Christy’s first payment goes towards the principal. Principal paid = Monthly payment - (Loan amount x Rate ÷ 12)
A lender determines that a homebuyer can afford to borrow $160,000 on a mortgage loan. The lender requires an 80% loan-to-value ratio. How much can the borrower pay for a property and still qualify for this loan amount?
The borrower can pay $200,000 for a property and still qualify for this loan amount.
The Browns obtain a fixed-rate amortized 30-year loan for $310,000 @ 6% interest. If the monthly payments are $1,815, how much interest do the Browns pay in the first month of the loan?
The Browns pay $1,550 of interest in the first month of the loan. In this case, your interest rate is 6.3%. (annual payment / loan amount) = interest rate. Divide annual payment by 12 months.
Interest only loan:
Total interest = Loan Amount X Rate X Term in years
Amortized Loan
Total interest = (Monthly PI Payment X12 X term) - Loan Amount
Amortization Calculation Month 1
Principal paid = Monthly payment - (Loan amount X Rate/12)
Amortization Calculation Month 2
New Loan Amount = (Previous month principal - principal paid)
Amortization Calculation Principal Paid
= Monthly payment - (New loan amount X Rate/12)
A loan applicant has an annual gross income of $76,000. How much will a lender allow the applicant to pay for monthly housing expense to qualify for a loan if the lender uses an income ratio of 30%?
(annual gross income/12) * income ratio
(76,000/12)*30%
If you owe $14,000 on a new loan and pay $880 of interest for the year, your interest rate is?
6.3
Interest rate =
Annual payment/loan amount
how much is the loan’s principal balance?
(1458X12)/0.7
Monthly pymnt*12
/ interest rate
Simple Appreciation Formula
Total appreciation = current value - original price
Total appreciation rate =
total appreciation/original price
Average annual appreciation rate =
total appreication rate/# of yrs
One year appreciation rate
Annual appreciation amount/value at beginning of yr
A home purchased for $200,000 five years ago is now worth $300,000. What are the total appreciation amount, total appreciation rate, and average appreciation rate?
Total appreciation = ($300,000 - 200,000), or $100,000
Total appreciation rate = ($100,000 ÷ 200,000), or 50%
Average annual appreciation rate = 50% ÷ 5 years = 10%
A home costing $250,000 is worth $268,000 one year later. What is the one-year appreciation rate?
One-year appreciation rate = ($18,000 ÷ 250,000) = 7.2%
