Thinking Mathematically by Robert Blitzer

Document Sample

```					  Thinking
Mathematically
Consumer Mathematics and Financial
Management
8.6 The Cost of Home Ownership
Terminology
Mortgage broker- offers to find you a mortgage
lender willing to make you a loan.
Fixed rate mortgage - have the same monthly
payment during the entire time of the loan
Variable rate mortgage (ARM) - have payment
amounts that change from time to time depending
on changes in the interest rate.
Monthly Mortgage Payments
The monthly mortgage payment, PMT, required to
repay a loan of PV dollars paid n times per year
over t years at an annual rate r is given by
r
PMT  PV           n
 nt
 r
1  1  
 n
Example – Home Mortgage
Exercise Set 8.6 #1
–   Home is purchase for \$220,000
–   20% down payment
–   3 points
–   30 year fixed rate mortgage at 7%
 Down payment?
 Amount of the mortgage?
 Charge for points?
 Monthly payment (principal and interest)?
 Total cost of interest over 30 years?
Loan Amortization Schedule
(see Table 8.6, page 495)
Thinking
Mathematically
Consumer Mathematics and Financial
Management
8.6 The Cost of Home Ownership

```
DOCUMENT INFO
Shared By:
Categories:
Stats:
 views: 13 posted: 7/29/2011 language: English pages: 6