Florida Real Estate Broker ExaminationReal Estate CalculationsMedium
A borrower obtained a fully amortized loan of $250,000 at an annual interest rate of 6% for 30 years. The loan constant provided by the lender is 0.0059955. What is the borrower's approximate monthly mortgage payment?
- A$2,497.75
- B$1,248.95
- C$1,798.65
- D$1,498.88
Show answer & explanationAnswer & explanation
Correct answer: D. $1,498.88
To calculate the monthly mortgage payment using a loan constant, you multiply the loan amount by the loan constant. So, $250,000 * 0.0059955 = $1,498.875, which rounds to $1,498.88.
Why the other options are wrong
- A. This is incorrect; it is significantly higher than the actual payment.
- B. This is incorrect; it may result from miscalculation or using a different constant.
- C. This is incorrect; it may result from miscalculation or using a different constant.
Loan Constant (Mortgage Payment)
A loan constant is a factor used to quickly calculate the monthly payment required to amortize a loan over a specific term and interest rate.
- Formula: Loan Amount * Loan Constant = Monthly Payment.
- It incorporates the interest rate and loan term.
- Useful for estimating payments without complex amortization tables.
Memory trick: Loan times constant, payment's a given!