Mortgage Problem and Time Value of Money

Mortgage Problem and Time Value of Money

Mortgage Problem 

Suppose you are planning to buy a house using a 30 years mortgage financing.
Which house would you like to buy? What is its price? If you provide 20% down payment, what will be the approximate amount needed to complete the transaction, including closing costs?

How would you set up the timeline for this problem? What are the calculator keystrokes or excel formula for solving this problem?

What is the loan amount for the mortgage problem? What mortgage interest rate can you get? What will be the monthly payment? How much of that is interest and how much is principal repayment in the 1st and 2nd month?

How much principal amount will be remaining after the 85th payment?

Understanding Time Value of Money

What do you understand by the term time value of money? What do you feel about it? What are some of the reasons that money has a time value?