1. Lesson3: Mortgage Payments Amortization = How long it takes you to pay off the house, ex: 10, 20 years or more. Down Payment = 1 st cash payment of at least 10% of house selling price. Payment Chart = Determines how much you have to pay every MONTH to pay off the house. Payment Calculations = Remember to subtract the down payment first! (chart #)x($000’s owing on house)

2. Warning: If you choose to make smaller payments it will take you a lot longer to pay off the house. Maybe it’s all you can afford per month but know that it will cost you way more overall. Pay it off fast as possible to save on ‘interest’ charges.

3. Lesson 3: Answers The monthly payments are: #1a) $453.50 d) $291.15 b) $395.85 e) $747.00 c) $579.60

4. #2a) 70 x 11.68 = $817.60/month b) $817.60 x 12 months x 10 yrs = $98112 total paid 98112 total paid -70000 borrowed $28112 is the money the banks keeps aka ‘interest’ #3a)70 x 7.16 = $501.20/month b) $501.20 x 12 x 25 = $150360 total paid 150360 total paid -70000 $80360 interest

5. c) She paid 80360-28112 = 52248, over $50000 extra in interest charges over 25 instead of 10 years. d) She may still choose this option if all she can afford is the cheaper monthly payment $501.20 vs. $817.60

6. #4 a) 65 x 8.13 = $528.45/month b) $528.45 x 12 x 20 = $126,828 total paid 126,828 total paid - 65000 borrowed $61828 interest #5)a) 45 x 8.13 = $365.85/month b) $365.85 x 12 x 20 = $87,804 87804 total paid -45000 borrowed $42804 interest c) They will save 61828 – 42804 = 19024, over $19000 because they paid more money up front!

7. Lesson 4: How much of your payment actually goes toward paying off the house? Some of your payment goes to paying off the house but some the bank gets to keep, aka ‘interest’. To calculate this, no chart is needed. Annual Interest = (Amount you still owe) X (Interest rate %) Then ÷12 for a month’s interest. The rest of your payment goes to pay off your house, aka ‘principal’ or ‘equity’.

8. Example: If you owe $200,000 on a house, with a mortgage rate of 5%, and you plan to pay it off in 25 years… a) How much is your monthly payment? b) How much of this does the bank get to keep? c) How much of your payment actually goes to pay off the house?

9. Solution: a) Use chart to calculate monthly payment: $200 X 5.82 = $1164/month b) Amount of interest that the bank gets to keep out of this payment = $200,000 X 0.05 = $10,000/yr (This is the interest amount for a whole year.) (Only the chart breaks it down monthly.) So, $10000 ÷ 12 = $833.33 interest must come out of your payment this month.

10. c) The amount that goes to pay off your house is actually only… = your payment – interest the bank is keeping = $1164 – $833.33 = $330.67

11. Assignment: Calculate the amount of interest AND the amount of principal (aka equity) in the first payment for each house in question #1 of Lesson 3 on Mortgage Payments.

12. Remember -- NO chart required… #1a) $50,000 x 0.0725 = $3625/yr ÷ 12 = $302.08/month interest for the bank $453.50 (payment) – $302.08 (interest) = $151.42 toward the house.

13. Answers: #1 a)$453.50 paymentd)$291.15 payment -$302.08 interest -$ 78.13 interest $151.42 toward the house$213.02 toward the house b) $395.85 paymente) $747.00 payment -$189.58 interest -$645.83 interest $206.27 toward the house $101.17 toward the house c)$579.60 payment -$466.67 interest $112.93 toward the house