Mortgage Math Chapters – Fast Track

Unlock the Secrets of Mortgage Finance: Chapters 13–17

Mastering mortgage finance is essential for anyone navigating the real estate world. In Chapters 13 through 17 of our comprehensive course, you’ll gain the tools and knowledge to succeed. This segment is perfect for anyone seeking to understand mortgages, interest rates, and property equity in-depth.

Chapter 13: Foundations of Mortgage Mathematics

Kickstart your journey with a solid foundation in mortgage math. Learn the difference between simple and compound interest, essential for calculating mortgage payments. We introduce key terms like Future Value (FV) and Present Value (PV) and explain their critical roles in the relationship between the mortgagee and mortgagor.

Chapter 14: Advanced Mortgage Rate Conversions

Building on Chapter 13, this chapter focuses on converting annual effective rates (J1) to semi-annual (J2) and monthly rates (J12). Learn how to calculate interest rates, present value, and compounding periods throughout a loan’s lifetime. With simplified formulas and step-by-step guidance, you’ll master these essential skills faster than through self-study.

Chapter 15: Introduction to Mortgage Law

Dive into the legal framework of mortgages. Understand how a mortgage is an interest in land rather than a loan and explore the distinction between legal and equitable mortgages. Learn how home equity—defined as the difference between a property’s market value and outstanding debts—can be leveraged. This chapter equips you with a solid understanding of mortgage contracts and charges.

Chapter 16: Mortgage Analysis and Vendor Take-Back Mortgages

Enhance your financial analysis skills with advanced mortgage concepts. Discover how property owners can act as lenders through Vendor Take-Back Mortgages. Learn to calculate the market value of purchasing a mortgage and explore the intricacies of mortgage assumption, including anticipated yield calculations. We also cover prepayment penalties and how to calculate their impact on borrowers.

Chapter 17: Comprehensive Review and Practical Applications

Put your knowledge to the test with real-world applications. This chapter ties everything together, reinforcing concepts like rate conversions, mortgage law, and financial analysis to ensure you’re ready for any mortgage-related challenge.

Why Choose This Course?

Whether you’re a beginner or a seasoned professional, this course simplifies complex concepts, helping you understand mortgage finance with confidence. By the end of Chapter 17, you’ll have an advanced understanding of mortgage interest rates, legal frameworks, and financial analysis.

 

 

Chapter 13 – Introduction to Mortgage Finance

COURSE DESCRIPTION

Chapter 13 serves as the foundation of the math chapters and is critical for our students to pass the exam. We will review the differences between simple interest and compound interest in the context of a mortgage. In the initial segments, we will discuss the equations required to calculate interest. New terms, such as “Future Value” (FV) and “Present Value” (PV), will be introduced, along with an explanation of how interest impacts the roles of the mortgagee and the mortgagor.

 

 

LEARNING OUTCOMES

• What is a Nominal interest rate expressed per annum (per year)
• Expressing what a Periodic Rate (expressed annually, semi-annually, monthly) etc
• How do we express these rates as effective rates
• Rate conversions (J1, J4, J6, J12)
• The Federal Interest Act
• Interest Accruing Loans
• Constant Payment Repayment Loans
• Straight-Line Principle Reduction Loans
• Mortgage Markets (Primary & Secondary Markets)
• Variable Rate Mortgages
• Vender Take-Back Morgage
• Graduated Payment Morgage
• And more!

Chapter 14 – Interest Rates and Mortgages

COURSE DESCRIPTION
In Chapter 14, we build on the concepts introduced in Chapter 13: Introduction to Mortgage Finance. If you have not completed Chapter 13, we strongly recommend reviewing that material before attending this lesson. In this chapter, we will explore how to convert an annual effective interest rate (J1) to a semi-annual rate (J2) and further to a monthly rate (J12). Additionally, we’ll cover how to calculate the Interest Rate, Present Value, Payment, and the number of compounding periods over the lifetime of a loan.

CERTIFICATION
This chapter may seem intimidating for beginners, but we break it down step by step, simplifying the formulas to help you learn the material up to 80% faster compared to self-study. By the end of this segment, you should feel confident in your understanding of the concepts. One advantage of the math chapters is their clarity—unlike sections that involve interpretation or “word games,” math provides definitive answers, making it easier to identify the correct solution.

 

 

 

 

Chp. 15 – Chapter 15 – Lesson Description

COURSE DESCRIPTION

In this segment, we will cover an introduction to Mortgage Law.  A mortgage is an interest in land created by a contract.  The relationship is that of the debtor and creditor.  One very important thing to note is that a mortgage is not a loan but rather it is evidence of a debt or contract.  The legal definition of all mortgages is known as a “charge” against the property.  In addition, the first mortgage is known as the legal mortgage and subsequent mortgages are equitable mortgages.  This is how people can access the equity or value in the home.  Home equity is known as the difference between the market value and any mortgages or debts owed to the property.

 

LEARNING OUTCOMES

• An overview of mortgage law
• Defining what is a Legal and Equitable mortgage
• Clogging
• The contractual right of redemption
• Special types of mortgages
• Default and Foreclosure process
• Typical terms and definitions you might see
• Federal legislation
• Assignment of a mortgage and what is Assumable
• Steps in a forclosure
• Charges and what to look for on the title

 

 

 

Chapter 16 – Mortgage Analysis in Real Estate Practice

 

COURSE DESCRIPTION
Chapter 16 enhances your calculator skills by introducing mortgage analysis. Among other topics, we explore how a property owner can act as the lender by granting a mortgage, commonly referred to as a Vendor Take-Back Mortgage. We will also calculate the market value or cash equivalent price of purchasing a mortgage from the lender’s perspective.

Additionally, we will examine another method of determining market value through mortgage assumption and learn how to calculate the anticipated yield for the lender. Finally, we’ll cover the importance of understanding prepayment penalties associated with a mortgage and how to calculate these costs for the borrower.

LEARNING OUTCOMES

• Calculating and further explanation of Vendor Take Back Mortgages
• From an investor/lender’s point of view, how to calculate Market Value
• The cash equivalent price of purchase
• Mortgage Assumption calculations & concept overview
• Define “Yield” to the lender & the cost of funds advanced
• The borrower’s responsibility to pay mortgage prepayment penalties

 

 

Chapter 17 – Mortgage Underwriting and Borrower Qualification

COURSE DESCRIPTION

This is a math chapter and should be reviewed after you feel comfortable with Chapter 13 & Chapter 16.  In the session, we will grasp an understanding of the Loan to Value Ratio (L/V).  Definition: the lender’s examination of the borrower’s personal income as the source of funds to make the mortgage payments.  The property is owner-occupied. Meaning that the bank must look at the borrower’s personal income as the source of funding for the mortgage payments since there is no income to the owner from the property.  To make the decision on what size and kind of loan can be lent, the lender has to look at the characteristics of the borrower and the value of the subject property.

Borrower Qualification – 5 C’s of Credit

1. Credit: Most importantly Credit History – what is a borrower’s credit history when it comes to making payments back to build credit

2. Collateral: What, if any, is additional security for the loan in case the borrower is unable to repay, or if they have bad credit.

3. Character: Is the person applying for the loa, the kind of person that would make all the necessary payment to pay it back in full? Ex. Current and past employment, education, business experience, etc.

4. Capacity: Based on income, can the borrower pay back the loan amount – strictly financially speaking

5. Capital: How much will the borrower personally invest. Ex, downpayment, money saved.

LEARNING OUTCOMES

• Identifying borrower qualifications using the 5 C’s of Credit
• Risk analysis  – How much money can a borrower borrow?
• Using a test to see how much income will support GDSR
• Gross Debt Service Ratio techniques.
• Loan to Value Ratio
• Using PMT to find the payment symbolizing maximum payment the borrower can afford
• The Present Value of the max payment
• Loan to Value Ratio (L/V)