Real Estate Math
A Stowe vacation property is purchased for $620,000 with a 25% down payment. What is the mortgage amount?
A$155,000
B$420,000
C$465,000✓ Correct
D$475,000
Explanation
Down payment = 25% x $620,000 = $155,000. Mortgage = $620,000 - $155,000 = $465,000.
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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.
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.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
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