Real Estate Math
A buyer finances $400,000 at 6.5% interest for 30 years. The monthly payment factor for a 6.5% 30-year loan is approximately $6.32 per $1,000. What is the approximate monthly P&I payment?
A$2,528✓ Correct
B$2,600
C$2,450
D$2,660
Explanation
Monthly P&I = ($400,000 ÷ $1,000) × $6.32 = 400 × $6.
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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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