Mortgage Basics Overview

Mortgage Overview

• A mortgage is a process allowing you to pay for a property's cost over time, not immediately.
• It's a loan secured by real estate or personal property.
• An example is when a buyer saves part of the property cost but needs a loan to cover the remaining balance.

Mortgage Loan

• A mortgage loan uses the property as collateral for a loan from a financial institution.
• Collateral is the property held as security against the loan.
• The mortgage loan amount equals the purchase price minus the down payment.

Down Payment

• A down payment is a certain percentage of the property's purchase price.
• It's also known as the buyer's equity.
• It's the initial payment when buying something with an agreement to pay the rest later.
• Down Payment = Purchase Price x Down Payment Percentage

Amortization Method

• A method of paying a loan (principal and interest) in equal amounts at regular intervals.
• The term of a loan is the total number of payments.
• An amortization table displays the installment payment schedule.
• It shows how much of each payment goes to principal and interest over the loan term.

Chattel Mortgage

• A mortgage on movable property.
• Outstanding Balance is the remaining debt at a specific time.

Example Calculations

• For a Php 2,205,600 house, with a 20% down payment, the down payment is Php 441,120.
• The mortgage loan is Php 1,764,480.

Formula for Monthly Payment

• A = i x P (1 + i)ⁿ / (1 + i)ⁿ -1

  • A = Monthly payment
  • P = Loan amount (initial amount)
  • i = Monthly interest rate
  • n = Total number of payments (years * months)

• Total Payment = Monthly Amortization x Total number of payments.

• Total Interest = Total Payment - Mortgage Loan Amount.