7.4B Amortization Tables Worksheet

Front

What is an amortization table?

Back

An amortization table is a schedule that details each payment on a loan over time, showing the amount of principal and interest paid with each installment.

Front

Define adjustable-rate mortgage (ARM).

Back

An adjustable-rate mortgage (ARM) is a type of mortgage where the interest rate is not fixed and can change at specified times, usually in relation to an index.

Front

What is the purpose of an introductory rate in an ARM?

Back

The introductory rate is a lower interest rate offered for an initial period to make the mortgage more affordable at the start.

Front

How do you calculate the remaining payments on a mortgage?

Back

To calculate remaining payments, subtract the number of payments already made from the total number of payments in the mortgage term.

Front

What does APR stand for and why is it important?

Back

APR stands for Annual Percentage Rate; it represents the yearly cost of borrowing, including interest and fees, and is crucial for comparing loan offers.

Front

What is the significance of the ending balance in a mortgage?

Back

The ending balance indicates the remaining amount owed on the mortgage after a certain number of payments have been made.

Front

How does a change in interest rate affect monthly mortgage payments?

Back

An increase in interest rate typically raises monthly payments, while a decrease lowers them, affecting the total cost of the loan.

Front

What is the formula for calculating monthly mortgage payments?

Back

The formula for calculating monthly mortgage payments is M = P[r(1+r)^n] / [(1+r)^n – 1], where M is the monthly payment, P is the loan principal, r is the monthly interest rate, and n is the number of payments.

Front

What is the impact of making extra payments on a mortgage?

Back

Making extra payments reduces the principal balance faster, which can lower the total interest paid and shorten the loan term.

Front

Explain the term 'principal' in the context of a mortgage.

Back

The principal is the original sum of money borrowed in a mortgage, excluding interest.