RE 611 / Fin 611 – Real Estate Finance
Fixed-rate Mortgages
Practice Problems
Dr. Stanley D. Longhofer
Interest-only Mortgages
1) Consider a $130,000, 5.25 percent, 20-year, interest-only mortgage with semi-annual
interest payments.
a) How large are each of the semi-annual payments?
b) What will be the principal balance outstanding on this mortgage after seven
years?
2) Consider a $180,000, 5.50 percent, 15-year, interest-only mortgage with monthly
interest payments.
a) How large are each of the monthly payments?
b) What will be the principal balance outstanding on this mortgage after four years?
Constant Amortization Mortgages
3) Consider a $180,000, 5.50 percent, 15-year, constant amortization mortgage (CAM)
with monthly payments.
a) What is the monthly payment that will be due on this mortgage during the 24th
month? How much of this payment is attributable to principal? How much to
interest?
b) What will be the principal balance outstanding on this mortgage after four years?
4) Consider a $90,000, 6.75 percent, 15-year, CAM with monthly payments.
a) What is the monthly payment that will be due on this mortgage during the 12th
month? How much of this payment is attributable to principal? How much to
interest?
b) What will be the principal balance outstanding on this mortgage after seven
years?
Constant Payment Mortgages
5) Consider a $124,000, 7.00 percent, 30-year, constant payment mortgage (CPM) with
monthly payments.
a) What is the required monthly payment on this mortgage?
b) If the first payment on this loan is on April 1, 2004, how much total interest will
be paid on this mortgage during 2004?
c) How much interest will be paid on this mortgage during 2005?
