Real Estate Math
A Minnesota investor purchases a property for $480,000 with 25% down. What is the equity at purchase and the initial loan amount?
A$360,000✓ Correct
B$96,000 equity; $384,000 loan
C$140,000 equity; $340,000 loan
D$100,000 equity; $380,000 loan
Explanation
Down payment (equity) = $480,000 x 25% = $120,000. Loan amount = $480,000 - $120,000 = $360,000.
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Key Terms to Know
Loan-to-Value Ratio (LTV)
The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
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.
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.
Math Concepts
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