Math Review – Test #2
1. You pay $11,200 in interest for the first year of your $160,000 mortgage loan. What interest
rate are you paying?
2. If you can borrow 90% of the appraised value of a property, the interest rate is 8%, and the
first month’s interest expense is $1,000, what is the appraised value of the property?
3. The mortgagee will be charging 1 (one) point on a loan. The sale price is $250,000 and the
LTV is 80%. How much will the mortgagor pay, in points, at closing?
4. On a home improvement loan you borrow $15,000 on a straight loan with a 10% Note Rate. If
you pay off the loan at the end of the first year, what will the final payment be if you pay the
interest on an annual basis?
5. A buyer is purchasing a home for $95,000 with an 80% LTV 1st mortgage loan. It will have a
loan origination fee of 1 point and 3 discount points. The closing fee is $235, recording fees
are $55 and the lenders title insurance policy is $140. The buyers have deposited $2,000 in
earnest money with the listing firm. How much money will the buyer need to bring to the
closing?
6. Sally buys a home for $275,000 with 90% LTV first at 6.5% annual interest, payable in equal
monthly installments of $1,564.37. What is the principal balance of the loan after the first
payment?
7. What is the annual real estate tax on a property appraisal at $150,000 which is assessed at
$195,000 with an equalization factor of 120 percent if the tax rate is 38 mills.
8. Kelli has been granted a loan of $340,500. How much will Kelli’s monthly principal and
interest payments be, using a loan payment factor of $7.16 per $1,000 of loan amount?
Answer Question #1:
$11,200 (part)
÷
÷
(whole) $160,000 X =________ (rate)
Answer: 7% (.07) Rate
Answer Question #2:
Step 1
Step 2
$1,000
monthly interest
x 12
= $12,000 annual interest (part)
÷
÷
Loan amt. X 8% (rate)
= $150,000
(.08)
Annual Interest ÷ Annual Rate = Loan Amount
$12,000 ÷ .08
= $150,000
Loan amt. $150,000 (part)
÷
= $166,667
÷
X 90% LTV (rate)
Loan Amount ÷ LTV = Value/Price
$150,000 ÷ .90 = $166,667
Answer Question #3:
$200,000 x .01 = $2,000 (one of the wrong answers will be $2,500)
$250.00 Sale Price
X .80 LTV
$200,000 Loan Amount
Answer Question #4:
Annual interest :
$15,000
x
.10
= $1,500
Pay off end of year 1:
Interest
$1,500
Principal Balance
+$15,000
Payoff
$16,500
Answer Question #5:
$95,000
X .20
$19,000 down payment
$95,000 Sales Price
x.80 LTV_
76,000 Loan Amt.
x.04 points
$3,040
$19,000 down payment
$ 3,040 points
$430 closing costs
$22,470 sub total
- $2,000 earnest money
= $20,470 cash to close
Answer Question #6:
Sales Price
LTV
loan amount
$275,000
X .90
$247,500
beginning loan bal.
x note rate
= annual interest
MONTH #1
$247,500
X .065
$16,087.50
annual interest
divided by 12
= month interest
$16,087.50
÷ 12
$1,340.63
$16,072.96
÷ 12
$1,339.41
constant mo. payment (P&I) $1,564.37
less mo. interest
-$1,340.63
$ for principal reduction
$223.74
$1,564.37
- $1,339.41
$224.96
beginning loan balance
less principal reduction
= new loan balance
$247,500.00
-$223.74
$247,276.26 *
MONTH #2 - shown just to illustrate further amortization
$247, 276.26
X .065
$16,072.96
$247,276.26
- $224.96
247,051.30
* $247,276.26 is the answer to question #6, ….month #2 is shown just to illustrate how the amortization process
would progress each month as the loan balance continues to decline (amortize).
Answer Question #7
Assessed Value
x Equalization Factor
= equalized value
x tax rate
= annual tax
$195,000
x 1.20
$234,000
.038
$8,892
Answer Question #8:
$340,500
Loan Amount
÷ $1,000
÷ Size of each mortgage factor unit
= 340.5
= Number of $1,000 units in a $340,500 loan
340.5
Number of units
x $7.16
x cost per unit/ aka mortgage factor
=$2,437.98 = Monthly P&I for a $340,500 loan when the
mortgage factor is $7.16/$1,000