THE CONCEPTS OF

BUYING AND SELLING:

Interest on Mortgage,
Amortization,
and other Services/Utilities.
Break-even Points in Units =

• CONTRIBUTION MARGIN=SELLING PRICE UNIT-VARIABLE COST UNIT

• Break-Even Price (BEP) = Cost Price (C) +

Operating Cost (OC)
•When money is borrowed or
invested, interest is paid. The
amount of money invested or
borrowed is called the principal.
When the interest is calculated as a
percentage of the principal, it is
called simple interest.
INTEREST APPLIED TO MORTGAGE
• In order to purchase a home, many people need to
obtain a loan. A loan that is used to pay for a home
or building is called a MORTGAGE.
• The value of the home or building less the amount
that is owed on the mortgage is called COLLATERAL.
If the buyer does not make regular payments on
the mortgage, the lending institution can repossess
the home and sell it to get its money back.
There are several types of mortgages
available:
•(a) fixed-rate mortgage
•(b) adjustable-rate mortgage
•(c) graduated payment mortgage
A. Fixed Rate Mortgage
The most common type of mortgage is the fixed-rate mortgage.
With this
type of mortgage, the interest rate remains the same for the term
of the mortgage.
The term could be any number of years; however, the most
common terms are
5, 10, 15, 20, 25, and 30 years. Payments are usually made
monthly.
A lending institution usually requires a down payment on a home
before
it gives the buyer a mortgage.
EXAMPLE:
If a home is sold for P890,000 and the bank requires a
20% down
payment, find the amount to be financed.
 B. Adjustable-Rate Mortgage(ARM)
• An adjustable-rate mortgage (ARM) is a type of mortgage in which the
interest rate applied on the outstanding balance varies throughout the life of
the loan.
• With an adjustable-rate mortgage, the initial interest rate is fixed for a period.
After this initial period of time , the interest rate resets periodically, at yearly
or even monthly intervals.
• ARMs are also called variable-rate mortgages or floating mortgages. The
interest rate for ARMs is reset based on a benchmark or index, plus an
additional spread called an ARM margin.
• An ARM can be a smart financial choice for home buyers that are planning to
pay off the loan in full within a specific amount of time or those who will not
be financially hurt when the rate adjusts.
Typically, an ARM is expressed as two
numbers.
• (a) the length of time; and
• (b) the fixed rate is applied to the loan.
• If you're considering an adjustable-rate mortgage, you can compare
different types of ARMs using a mortgage calculator.
C. Graduated Payment Mortgage
• A graduated payment mortgage (GPM) is a type
of fixed-rate mortgage in which the payments
increase gradually from an initial low base level
to a higher final level.
• Typically, the payments will grow between 7-12
percent annually from their initial base payment
amount until the full monthly payment amount
is reached.
• A graduated payment mortgage is designed to start
with the homeowner owing minimum payments.
Then, over time, the payment amount increases. A
low initial interest rate is used to qualify the buyer.
This type of mortgage payment system may be
optimal for young or first-time homeowners as their
income levels tend to rise gradually.
• Also, if the graduated payment mortgage is a negative
amortization loan, the borrower will pay even more
interest on the loan. As deferred interest adds to the
principal borrowed, this value grows.
Finding Monthly Payments
Hanggang dito lang ang test natin for summative and quarterly test.