Thinking Mathematically by Robert Blitzer

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					  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

				
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