Real Estate Math
A $150,000 loan at 6% annual interest. What is the first month's interest?
A$625
B$750✓ Correct
C$875
D$900
Explanation
Monthly interest = $150,000 × (6% ÷ 12) = $150,000 × 0.005 = $750.
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Key Terms to Know
Amortization
The gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
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