Solving Problems on Business and Consumer Loans (Amortization and Mortgage) PDF

Solving Problems on Business and Consumer Loans (Amortization and Mortgage) MORTGAGE A process that will let you not to pay for the whole cost of the property purchased immediately A type of loan that is secured with real estate or personal property Example: Suppose you have saved...

Solving Problems on Business and Consumer Loans (Amortization and Mortgage) MORTGAGE A process that will let you not to pay for the whole cost of the property purchased immediately A type of loan that is secured with real estate or personal property Example: Suppose you have saved Php 400,000 and you are planning to buy a house that costs Php 2,500,000. Since your savings is not enough to fully pay for the house in cash, you applied for a mortgage from a bank. You used your savings as a down payment, and then you will pay the remaining balance to the bank using the house as collateral. MORTGAGE LOAN Thisis the term used when you make your property as collateral for a loan from a financial institution. Collateral: the property that is held as security on a mortgage. Mortgage loan = Purchase price – Down payment DOWN PAYMENT A certain percent of the purchase price of the property  Generally called the buyer’s equity  The first payment that one makes when one buys something with an agreement to pay the rest later. Down payment = Purchase x Down payment % = Purchase/selling Price – Mortgage loan Mortgage Loan = Purchase Price – Down Payment EXAMPLE:  Assume that you wish to purchase a house and lot worth Php 2,205,600 and the seller requires a 20% down payment.  1. How much is the down payment?  2. How much is the mortgage loan? Down Payment = Purchase Price x Down Payment % = 2, 205, 600 x 0.20 = Php 441, 120 Mortgage Loan = Purchase Price – Down Payment = 2, 205, 600 – 441, 120 = 1,764,480 AMORTIZATION Method A Method of paying a loan (principal and interest) on installment basis, usually of equal amounts at regular intervals Term of Loan Total Number of payment Amortization table Is a table or chart that shows the installment payment schedule for the period of payment. Chattel Mortgage a mortgage on a movable property  Outstanding Balance  any remaining debt at a specified time EXAMPLE Assume that you need to pay for 20 years that house and lot purchased. In how many months will it take for you to fully pay your loan?  Formula (for the monthly payment/monthly Amortization) 𝒊 𝒙 𝑷 (𝟏 + 𝒊) 𝒏 A= 𝒏 (𝟏+𝒊) −𝟏 Note: 𝒓𝒂𝒕𝒆 A – Monthly payment i= (𝒎𝒐𝒏𝒕𝒉𝒔) P – Loans initial amount/mortgage loan amount i – Monthly Interest Rate n = years x months n – Total number of payment  Total Payment = Monthly Amortization x Total number of payments  Total Interest = Total Payment – Mortgage Loan Amount EXAMPLE:  Assume that you wish to purchase a house and lot worth Php 2,205,600 and the seller requires a 20% down payment. Then you will loan the balance from a bank that charges 7.5% annual interest rate to be paid for 20 years?  A. How much is your monthly amortization?  B. How much is the total interest on your loan? AMORTIZATION TABLE An amortization schedule is a table that lists each regular payment on a mortgage over time. A portion of each payment is applied toward the principal balance and interest, and the amortization schedule details how much will go toward each component of your mortgage payment.