8.3A Mortgage Payments & Escrow Worksheet

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What is a mortgage?

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A mortgage is a loan specifically used to purchase real estate, where the property serves as collateral for the loan.

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What does APR stand for in mortgage terms?

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APR stands for Annual Percentage Rate, which represents the yearly interest rate charged on a loan.

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How do you calculate monthly mortgage payments?

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Monthly mortgage payments can be calculated using the formula: M = P[r(1+r)^n] / [(1+r)^n – 1], where M is the total monthly mortgage payment, P is the loan principal, r is the monthly interest rate, and n is the number of payments.

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What is the purpose of escrow in mortgage payments?

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Escrow is used to hold funds for property taxes and insurance, ensuring that these payments are made on time.

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How is total interest paid over the life of a mortgage calculated?

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Total interest is calculated by subtracting the principal amount borrowed from the total amount paid over the life of the loan.

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What is a down payment?

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A down payment is the initial upfront payment made when purchasing a home, typically expressed as a percentage of the purchase price.

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What is the difference between a fixed-rate mortgage and an adjustable-rate mortgage?

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A fixed-rate mortgage has a constant interest rate throughout the life of the loan, while an adjustable-rate mortgage has an interest rate that may change at specified times.

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What are property taxes?

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Property taxes are taxes assessed on real estate by the local government, based on the property's value.

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What is homeowners insurance?

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Homeowners insurance is a type of property insurance that covers losses and damages to an individual's home and belongings.

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How do you determine the total monthly payment including escrow?

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Total monthly payment including escrow is calculated by adding the monthly mortgage payment, monthly property tax, and monthly homeowners insurance.