Real Estate Math
A buyer purchases a property for $350,000 with a 10% down payment. Two years later, the property is worth $420,000. What is the percentage increase in value?
A20%✓ Correct
B10%
C25%
D16.7%
Explanation
Percentage increase = (New value – Original value) ÷ Original value × 100 = ($420,000 – $350,000) ÷ $350,000 × 100 = $70,000 ÷ $350,000 × 100 = 20%.
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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.
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.
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.
Math Concepts
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