Real Estate Math
A Nevada lender offers a 30-year fixed mortgage at 7% on a $400,000 loan. Approximately what is the monthly principal and interest payment?
A$2,661✓ Correct
B$2,800
C$3,200
D$2,450
Explanation
Using the standard mortgage payment formula for $400,000 at 7% for 30 years: Monthly payment ≈ $2,661. (Factor: 7% / 12 = 0.
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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.
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.
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.
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