New Jersey Real Estate Practice Exam Practice Question
Scenario/Extract:
A buyer is purchasing a $400,000 home and the lender has approved a $320,000 mortgage with a 6% interest rate, amortized over 30 years.
What will the buyer's yearly principal and interest payments total (rounded up)? (BE SURE TO USE THE AMORTIZATION TABLE.)
Correct Answer: A
Rationale: To determine the buyer's yearly principal and interest payments, an amortization table is essential for calculating the total payments over the loan term.
Option A, $23,248, accurately reflects the total yearly payments based on the loan amount, interest rate, and term, as derived from the amortization schedule.
Option B, $29,060, and Option C, $29,867, are both higher than the calculated payments, indicating an overestimation of either the interest rate or the loan duration.
Option D, $34,874, significantly exceeds the expected payments, suggesting a miscalculation in the amortization process or incorrect assumptions about the loan terms.
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