Understanding mortgage loans

Understanding mortgage loans while you sharpen your basic mathematics skills is what I will show in this lesson.

When buying a house most people take mortgage loans from a bank for the amount they finance, or still unpaid.

When a loan is given, it is repaid with interest in equal monthly installments over a period of time, usually from 15 to 30 years.

Ever wondered about some simple basic math involved in that type of loan?

Say for instance you buy a house for 250,000. Then, you make a down payment of 15% of the purchase price and take a 30-year mortgage for the balance.

What is your down payment?

What is your mortgage?

Down payment = Purchase Price × Percent Down

Down payment = 250,000 × 0.15 = 37500

Amount of Mortgage = Purchase Price − Down Payment

Amount of Mortgage = 250,000 − 37500 = 212500

If your monthly payment is 1200 dollars, what is the total interest charged over the life of the loan?

Total Monthly Payment = Monthly payment × 12 Months per year × Number of years

Total Monthly Payment = 1200 × 12 × 30 = 432000

Total Interest Paid = Total Monthly Payment − Amount of Mortgage

Total Interest Paid = 432000 − 212500 = 219500

Use the quiz below to see how well you understand mortgage loans

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