Mortgage Practice

Front

What is a mortgage?

Back

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

Front

What is the purpose of a down payment in a mortgage?

Back

A down payment is an upfront payment made when purchasing a home, reducing the amount of the mortgage loan needed.

Front

How do you calculate the total amount paid over the term of a mortgage?

Back

Multiply the monthly payment by the total number of payments (months) in the loan term.

Front

What is the formula to calculate the mortgage loan amount needed?

Back

Mortgage Loan Amount = Purchase Price - Down Payment.

Front

What does the term 'loan term' refer to in a mortgage?

Back

The loan term is the length of time over which the loan must be repaid, commonly 15, 20, or 30 years.

Front

How is the monthly mortgage payment calculated?

Back

Monthly payment is calculated based on the loan amount, interest rate, and loan term using a mortgage formula.

Front

What is the significance of the interest rate in a mortgage?

Back

The interest rate determines how much interest will be paid on the loan amount over the loan term.

Front

What does 'amortization' mean in the context of mortgages?

Back

Amortization is the process of paying off a loan over time through regular payments that cover both principal and interest.

Front

What is the impact of a higher down payment on a mortgage?

Back

A higher down payment reduces the loan amount, potentially lowers monthly payments, and may eliminate private mortgage insurance (PMI).

Front

What is private mortgage insurance (PMI)?

Back

PMI is insurance that protects the lender if the borrower defaults on the loan, typically required when the down payment is less than 20%.