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Day 3: Lesson 2 – MortgagesA mortgage is a special type of _________________. It is basically just a ____________ that is secured by the value of a real estate property, such as a house or building. Here a few key mortgage terms:Fixed rate mortgage – a mortgage with a constant, fixed ______________ rateAmortization – the ____________ period it would take to pay off a mortgageAmortization Period – the time for which the calculation of a mortgage _____________ is determinedMortgage term – the ________________ of the mortgage agreementAgain, we will be using the TVM Solver to work through some different styles of mortgage questions. Use the guide below so you know that the letters mean N = number of PAYMENTS total (number of years x amortization period)I% = Annual interest rate (same as before)PV = The amount of the mortgage (not necessarily the cost of the house!)PMT = Amount of each payment FV = 0 (we assume the mortgage will be paid off in full by the end of the amortization period)P/Y = Payments per yearC/Y = 2 (For all Canadian mortgages, the C/Y is 2)PMT: END (always)We also have a new button!To calculate the total principal paid after the mortgage term:Press APPS then 1:FinanceGo to 0:Prn and press enterEnter 1 then “comma” then “number of months of the term” then put a bracketThen press enter and the amount of principal paid should appearExample 1: Paying a MortgageKara recently bought her first home for $255 000. As a first-time homebuyer, Kara can make a 5% down payment on the home and take out a mortgage for the remaining balance. Her mortgage broker found a bank offering an annual interest rate of 5.49% for a five-year fixed rate mortgage based on an amortization period of 25 years.a) Calculate the down payment and the amount to be mortgaged.b) Use a TVM Solver to determine the monthly payment.Step 1: Before using the calculator, make a list of your values:N = I% = PV =PMT =FV =P/Y = C/Y =PMT:Step 2: Enter the information into the TVM solver and solve for the desired value. Step 3: Give your answer. Kara’s payments will be $_______________ per month.c) Calculate the total amount paid over the first five years.d) Calculate the total principal paid in the first five years.Note: five years x 12 = 60 monthsPress APPS, then 1: Finance Go to 0:Prn and press enter Enter 1, 60)Screen should read Prn(1,60) then press enterThe amount of principal paid is $__________________.e) Calculate the total interest paid in the first five years. ................
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