Financial Math: Home Sweet Home Flashcard

Front

What are amortization tables used for?

Back

Determining monthly mortgage payments on various rates and periods of home loans.

Front

What is the maximum down payment range that people save for a house?

Back

15% to 20%.

Front

The Millhouse family will take out a loan of $140,000 at an interest rate of 7.5%. What would be the least amount of years they could take out the home loan and still keep the payment under $1,265?

Back

20 years; $1,128.40.

Front

What is PMI?

Back

Private Mortgage Insurance.

Front

What is the least amount of years the Millhouse family can take out the home loan and keep the payment under $1,265?

Back

20 years.

Front

What is the formula for calculating monthly mortgage payments?

Back

M = P[r(1 + r)^n] / [(1 + r)^n – 1], where M is the total monthly mortgage payment, P is the loan amount, r is the monthly interest rate, and n is the number of payments.

Front

What does a higher down payment typically indicate?

Back

Lower monthly mortgage payments and potentially better loan terms.

Front

What is the purpose of Private Mortgage Insurance (PMI)?

Back

To protect the lender in case the borrower defaults on the loan.

Front

How does the interest rate affect monthly mortgage payments?

Back

Higher interest rates result in higher monthly payments.

Front

What is the difference between fixed-rate and adjustable-rate mortgages?

Back

Fixed-rate mortgages have a constant interest rate, while adjustable-rate mortgages have rates that can change over time.