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Amortization Schedule Explained | Real Estate Exam Prep Videos - YouTube
Channel: The Real Estate Classroom
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[Music]
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in today's real estate exam prep video
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i'm going to show you how to calculate
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principal interest taxes
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and insurance using the amortization
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schedule and we're going to do that
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right now hey everyone my name is paul
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bachewski and welcome to the real estate
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classroom youtube channel in this video
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i'm going to show you how to calculate
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what's called principal interest taxes
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and insurance which is basically your
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monthly mortgage payment
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using the amortization table or
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sometimes call to amortization
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schedule but before we do that we have
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to get back to the basics of
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what makes up your monthly mortgage
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payment all right and i did a previous
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video on
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this particular topic and you might want
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to check it out i'll leave it a link
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right up here in the upper right hand
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corner of your screen
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so your monthly mortgage payment is made
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up of four components we have the
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principal and interest
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principal and interest is referred to as
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the p and i
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that is the amount of money every month
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that we're paying the bank back for
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loaning
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us the money to purchase a house
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the next part is taxes which is the t
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part of p-i-t-i and that is money that
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goes in every month into a
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escrow account to pay your real estate
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taxes
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when real estate taxes come due and then
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the i stands for
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insurance that's the p-i-t-i portion
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of your monthly payment that is to pay
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your annual
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insurance premiums now a test question
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or a potential test question on your
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real estate exam
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it may ask you to calculate the p and i
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portion of your monthly payment user
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using the amortization schedule or they
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may
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want a full-blown p-i-t-i calculation
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and i'm going to show you how to do both
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in this video but first i want to show
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you how to use this table it's
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very simple on the upper level we have
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your
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loan in terms of years are you getting a
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10-year loan a 15 a 30-year loan and
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then on your left side
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is the interest rate at which you're
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going to obtain that loan
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all right that's your apr if you will
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and it's real simple so let's say that
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you're going to get a 30-year loan at
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three and a half percent
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all we do is cross cross reference here
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3.5 30 years and that gives us
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a loan calculation factor of 4.49 and
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i'll show you
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how how we implement that into the
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calculation here in a little bit
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so let's try another one let's say that
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your interest rate is 4.75 and you're
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doing a 15-year mortgage
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we just cross connect here and our
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loan calculation factor is 7.78 that is
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one of two components that you need
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to calculate your principal and interest
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payment now we use this amortization
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table
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when we're calculating the p and i
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portion
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of your p-i-t-i
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so to successfully calculate the
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principal and interest
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portion of your payment we're going to
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follow three steps here
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we have to calculate the amount that's
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borrowed
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multiply it by the loan factor what i
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just showed you how to calculate there
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using the amortization table
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that gives us our principal and interest
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payment i have the steps outlined
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here on your screen now on the right
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side of your screen is a
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sample real estate exam test question
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very typical of what you might see it
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says tom purchases a home for
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a hundred thousand dollars thomas
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putting 20 percent down that's his down
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payment
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his interest rate for the loan is 3.5
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percent and the term of the loan is 15
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years so he's going to get a 15-year
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mortgage
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that is enough right there right there
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to calculate your principal and interest
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portion
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of your payment however the test
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question goes on to say annual real
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estate taxes are twenty four hundred
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dollars and your annual insurance
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premium
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is twelve hundred dollars and the test
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question wants to know what is tom's
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monthly principal interest taxes
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and insurance payment or that p-i-t-i
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but the first thing we have to do is
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calculate the p i the principal and
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interest and how do we do that well we
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have enough information
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in this test question to calculate
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everything so step one
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is to calculate the down payment that
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tom
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has to bring to the closing because
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remember
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we're calculating the principal and
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interest based on the amount
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that's borrowed not the purchase price
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so in step one
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we're gonna calculate the down payment
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step one
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we take the purchase price of a hundred
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thousand dollars
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and we multiply that by twenty percent
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because tom is putting twenty percent
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down
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tom is going to put twenty thousand
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dollars down
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now in step two we're going to calculate
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how much is tom gonna borrow
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so so step two we take that hundred
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thousand dollar purchase price
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we minus the twenty thousand dollar down
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payment
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that means tom is going to borrow from
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the bank
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eighty thousand dollars the loan factor
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we're going to take 80 times 7.15 to
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give us the 572 or 572 dollars which is
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the
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principal and interest portion of the
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payment how did we come up with 80
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how did we come up with 7.15 well the
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first one is 80. remember
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the amortization schedule is based on
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using
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pni is per 1000 that's borrowed and
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here's how i tell students to figure
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this out
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we take the all the numbers in front
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of the last comma in the amount that's
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borrowed
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and we use that number so in this case
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tom's borrowing 80 000
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so we're going to use we're going to
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take 80 which is
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the number that's in front of that last
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comma
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so for example if it was one million one
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hundred thousand dollars
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one million one hundred thousand dollars
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we would use eleven hundred all right so
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we take
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all the numbers in front of that last
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comma
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but in this case tom is borrowing
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80 000 so we're going to take 80 which
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is the number
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in front of the last comma and we're
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going to multiply it by 7.15 how did we
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get that well
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going back to our amortization schedule
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tom is borrowing
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or his his apr is 3.5 percent
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and it's a 15-year loan so we're going
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to cross
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cross-reference here that gives us 7.15
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so we take 80 multiply it by 7.15 and
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that gives us our principal and interest
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payment of 572.
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now your real estate exam question
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may require you to stop there they just
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may ask you for pni
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i've seen that question several times
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but i want you to know how to complete
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this
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if you have to if you have to calculate
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all four components of your monthly
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payment p-i-t-i
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so let's do the rest of this math
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problem
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all right so let's complete our
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calculation let's figure out
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what our total monthly payment is our
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total p-i-t-i well
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we already know that our p p and i that
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principal and interest portion of our
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of our monthly payment is 572 dollars
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so how we figure out the rest is we add
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two more steps so step four we're going
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to take 2400
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which represents our annual real estate
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taxes
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and we're going to divide that by 12
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which is 12 months out of the year
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because remember we're trying to
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calculate our monthly
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principal interest taxes and insurance
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payment
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so we take 2400 we divide it by 12 for
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12 months
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that gives us a monthly total of 200
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so that means the bank is going to
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take 200 of our total monthly payment
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and put it in that escrow account
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to pay our annual property taxes that
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are due
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step five we're going to calculate our
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annual
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premiums for insurance so we take 1200
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which is how much our annual premium is
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again we divide it by 12 for 12 months
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in the year
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that gives us a monthly total of 100
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so again the bank's going to take 100 of
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that monthly mortgage payment
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and they're going to put it into that
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escrow account so when our annual
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premiums come due then they're going to
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pay that on our behalf
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remember escrow accounts are established
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to pay things like taxes and insurance
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on behalf of the borrower
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so now we can calculate our total
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monthly payment or what we call the
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p-i-t-i
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and i have it on your screen here so our
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p and i
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our principal and interest is 572
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our taxes remember our tax escrow
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requirement is two hundred dollars
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our insurance is one hundred dollars
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that gives us our total monthly p
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i t i of 872 dollars
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and that's how we calculate the p i t i
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now remember
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we don't know which type of question
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we're going to get on the real estate
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exam
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the real estate exam may just want us to
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calculate the p
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and i the principal and interest using
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the amortization table
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or they may ask us for the p-i-t-i in
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any case this video
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is going to it shows you how to
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calculate both
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if you're going to continue studying
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check out this video right here it'll
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help you
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further understand how we calculate
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p-i-t-i if you have not subscribed check
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out the little
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circle to my left here comments and
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questions down below
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love both of them i'll see you all in
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the next video
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