Mortgage Loans

1. Mortgage Loans

2. What is a Mortgage Loan?

3. What is a Mortgage Loan? • A loan secured by real property

4. What is a Mortgage Loan? • A loan secured by real property • Real Property: Land

5. What is a Mortgage Loan? • A loan secured by real property • Real Property: Land • Mortgage: the document which shows the property has a debt against it

6. What is a Mortgage Loan? • A loan secured by real property • Real Property: Land • Mortgage: the document which shows the property has a debt against it • The Mortgage is used to secure the debt

7. What is a Mortgage Loan? • A loan secured by real property • Real Property: Land • Mortgage: the document which shows the property has a debt against it • The Mortgage is used to secure the debt • Mortgage has become a generic term for the loan itself

8. Important Terms: Borrower: Lender: Collateral: Principal: Interest:

9. Important Terms: Borrower: Someone who is receiving money in exchange for a pledge to repay it Lender: Collateral: Principal: Interest:

10. Important Terms: Borrower: Someone who is receiving money in exchange for a pledge to repay it Lender: Someone who is providing money in exchange for a pledge of repayment Collateral: Principal: Interest:

11. Important Terms: Borrower: Someone who is receiving money in exchange for a pledge to repay it Lender: Someone who is providing money in exchange for a pledge of repayment Collateral: Property pledged to a lender to secure repayment of a debt Principal: Interest:

12. Important Terms: Borrower: Someone who is receiving money in exchange for a pledge to repay it Lender: Someone who is providing money in exchange for a pledge of repayment Collateral: Property pledged to a lender to secure repayment of a debt Principal: The amount of money being borrowed Interest:

13. Important Terms: Borrower: Someone who is receiving money in exchange for a pledge to repay it Lender: Someone who is providing money in exchange for a pledge of repayment Collateral: Property pledged to a lender to secure repayment of a debt Principal: The amount of money being borrowed Interest: Money paid to a lender in excess of the principal

14. What is Foreclosure?

15. What is Foreclosure? Foreclosure: the lender seizing control of or repossessing the property

16. What is Foreclosure? Foreclosure: the lender seizing control of or repossessing the property

17. Two Types of Mortgages:

18. Two Types of Mortgages: • Fixed Rate Mortgage: • Adjustable Rate Mortgage:

19. Two Types of Mortgages: • Fixed Rate Mortgage: The interest rate is constant for the life of the loan • Adjustable Rate Mortgage:

20. Two Types of Mortgages: • Fixed Rate Mortgage: The interest rate is constant for the life of the loan • Therefore, the principle and interest payments remain the same for the life of the loan. • Adjustable Rate Mortgage:

21. Two Types of Mortgages: • Fixed Rate Mortgage: The interest rate is constant for the life of the loan • Therefore, the principle and interest payments remain the same for the life of the loan. • Adjustable Rate Mortgage: The interest rate of the loan resets periodically during the life of the loan

22. Two Types of Mortgages: • Fixed Rate Mortgage: The interest rate is constant for the life of the loan • Therefore, the principle and interest payments remain the same for the life of the loan. • Adjustable Rate Mortgage: The interest rate of the loan resets periodically during the life of the loan • With the changes to the interest rate, the principle and interest payments also change

23. Property Values: 3 Methods for determining values Actual Value: Appraisal: Estimated:

24. Property Values: 3 Methods for determining values Actual Value: The sale price of a property Appraisal: Estimated:

25. Property Values: 3 Methods for determining values Actual Value: The sale price of a property - Not usually available unless it is being purchased Appraisal: Estimated:

26. Property Values: 3 Methods for determining values Actual Value: The sale price of a property - Not usually available unless it is being purchased Appraisal: A value determined by a licensed professional Estimated:

27. Property Values: 3 Methods for determining values Actual Value: The sale price of a property - Not usually available unless it is being purchased Appraisal: A value determined by a licensed professional Estimated: A value obtained by the lender using an internal method

28. Formula for Calculating a Mortgage Payment Amount: c = the monthly principal and interest payment amount P = the principal balance of the loan r = the interest rate ÷ 12 N = the number of principal and interest payments

29. Example 1: You obtain a $200,000 mortgage loan at a rate of 5.25%. The loan is to be repaid over a 30 year period. What is the monthly principal and interest payment amount for the loan?

30. Example 2: You obtain a $375,000 mortgage loan at a rate of 6%. The loan is to be repaid over a 30 year period. What is the monthly principal and interest payment amount for the loan?

31. Calculating the Total Interest Paid Over the Life of the Loan: I = cN – P I = the total interest paid to the lender c = the monthly principal and interest payment amount N = the number of principal and interest payments P = the initial principal balance of the loan

32. Example 1: You obtain a $200,000 mortgage loan at a rate of 5.25%. The loan is to be repaid over a 30 year period. What is total interest paid over the life of the loan?

33. Example 2: You obtain a $375,000 mortgage loan at a rate of 6%. The loan is to be repaid over a 30 year period. What is the total interest paid over the life of the loan?