Mortgage Test Review

Mortgage Test Review

Study Guide & Practice Quiz

Vocab

Fixed Rate Mortgage - a mortgage in which the rate of interest remains the same during the time of the loan

Adjustable-rate Mortgage - a mortgage in which the rate of interest may escalate or deescalate during the time of the loan

Graduated Payments Mortgage - a mortgage in which the home buyer makes small payments at the beginning of the loan and larger payments at the end

Equity & Second Mortgages

Equity - the difference between the expected selling price of the home and the balance owed on the home

Second Mortgage - a mortgage against the equity of your home

Multiple Choice

This the type of mortgage which the rate of interest may escalate or deescalate during the time of the loan is called.

• Fixed Rate Mortgage

• Adjustable Rate Mortgage

• Graduated Payments Mortgage

Multiple Choice

This is the type of mortgage where the home buyer makes small payments at the beginning of the loan and larger payments at the end.

• Fixed Rate Mortgage

• Adjustable Rate Mortgage

• Graduated Payments Mortgage

Multiple Choice

This is the type of mortgage in which the rate of interest remains the same during the time of the loan.

• Fixed Rate Mortgage

• Adjustable Rate Mortgage

• Graduated Payments Mortgage

Monthly Payment Equation

P = Principal (Amount of Loan After Down Payment)

R = Interest Rate on Mortgage

N = Number of months

Multiple Choice

You purchase a home for $212,000 and had to put down 10% of the price of the home as a down payment. What is the principal of the loan?

• $21,200

• $190,800

• $233,200

Remember, principal is not the price of the house. It is the amount you borrow from the bank after the down payment.

• If you have a down payment of 8%, take the cost of the house and multiply it by .92 to get the principal.

Multiple Choice

You take out a 30 year loan and you are setting up your monthly loan equation. What is the value that you will enter for N?

• 180

• 30

• 15

• 360

Remember N is in months so convert years to months.

Ex - 30 years = 360 months, N=360

Ex - 15 years = 180 months, N=180

Multiple Choice

Your mortgage has an interest rate of 3.15%. What will your value of R be in the monthly mortgage equation?

• .0315

• .315

• 3.15

Multiple Choice

You purchase a house for $181,000 dollars and take out a 15 year mortgage with an interest rate of 2.65%. What did I do wrong when setting up my equation?

• R Is Incorrect

• N Is Incorrect

• P Is Incorrect

Multiple Select

Select the three options that represent ways that you can save money on a 30 year mortgage.

• Take out a second mortgage

• Refinance to a lower interest rate

• Fix up your house

• Refinance to a 15 year mortgage

• Make a larger down payment

Multiple Choice

Use an online mortgage calculator to find the monthly mortgage payment on a house that is listed at $324,000. Your mortgage is for 30 years with an interest rate of 3.15%. Your down payment is 9%.

• $1,860

• $2,650

• $2,250

Multiple Choice

Use an online mortgage calculator to find the monthly mortgage payment on a house that is listed at $117,000. Your mortgage is for 15 years with an interest rate of 4.25%. Your down payment is 10%.

• $774

• $921

• $1,048

Calculating Total Interest

Total Interest - The sum of the interest paid over the lifespan of a mortgage

Steps For Calculating Total Interest

1. Use mortgage calculator to find monthly payment

2. Calculate principal

3. Calculate total interest

Multiple Choice

You take out a 30 year mortgage on a house that is listed at $229,000. Your monthly payment on your mortgage of $1,529. Your down payment was 7%. Calculate the total interest paid.

• $190,035

• $337,470

• $183,130

Last Slide Explanation

You take out a 30 year mortgage on a house that is listed at $229,000. Your monthly payment on your mortgage of $1,529. Your down payment was 7%. Calculate the total interest paid.

Total Interest = (Amount of Payment * # of Payments) - Principal

Total Interest = ($1,529 * 360) - ($229,000 * .93)

Total Interest = $337,470

Calculating PITI (Monthly Mortgage Bill)

• Calculate the monthly mortgage payment

• Add the monthly tax payment  (yearly taxes divided by 12)

• Add the monthly insurance payment (yearly insurance divided by 12)

Multiple Choice

Your are charged $1,350 a year for home owners insurance. Calculate your monthly insurance payment.

• $1,350

• $16,200

• $112.50

Multiple Choice

Your monthly mortgage payment is $1,174. Your yearly taxes on the house amount to $1,054 and your homeowners insurance costs you $765 a year. Calculate your PITI.

• $1,325.58

• $1,395.49

• $1,458.21

Last Slide Explanation

Your monthly mortgage payment is $1,174. Your yearly taxes on the house amount to $1,054 and your homeowners insurance costs you $765 a year. Calculate your PITI.

PITI = Monthly Mortgage Payment + Monthly Insurance Payment + Monthly Tax Payment

PITI = ($1,174) + ($1,054/12) + ($765/12)

PITI = $1,325.58

The End

I hope this helps, use it as a study aid!