 Hello and welcome to the session. In this session we will discuss about mortgage loans and we will calculate monthly mortgage payments for fit-straight mortgage loan. Let us first understand the meaning of real estate or real property. Real estate or real property is land plus any permanent improvement on land. The improvement on land may include buildings, homes or any type of structure. These permanent structures are also known as real structures. Now let us understand the meaning of mortgage loans. Purchasing or constructing home, hotels, commercial buildings etc. is very expensive. Most of the people need to borrow some money in order to purchase or construct real property. For this they take loans. These loans are called mortgage loans because in these loans real property is kept as security with the lender. This property which is kept as security on a mortgage is called collateral. If a person is unable to repay the loan then the lender takes the possession of the property, kept as security and sells it in order to recover the loan. Although there are different types of mortgages but here we will understand the meaning of fixed rate mortgage. Under fixed rate mortgage the rate of interest remains same for the entire period of loan. Now we will discuss monthly mortgage payments. The loan is repaid in equal and regular installments which includes the repayment of principal and interest over a specific period of time. This process of repayment of loan is called amortization of the loan. We can calculate the amount of amortization or monthly mortgage payments using a table or a formula. We shall discuss some steps on how to calculate monthly mortgage payments using $1000 monthly payments table. In the first step we will find the amount financed using the formula amount financed is equal to purchase price minus the down payment. Next we find the number of $1000 units in amount financed by dividing the amount financed by $1000. That is the number of $1000 units is equal to amount financed upon $1000. From the table we will locate the table factor for given annual rate of interest and number of years financed. This table factor is the monthly payment for $1000 financed. So finally we calculate the monthly mortgage payments. So monthly mortgage payment is equal to number of $1000 units into table factor. We can also find the total interest on the loan. Total interest on loan is equal to monthly mortgage payment into number of payments minus the amount financed. For better understanding of all these steps let us consider an example. Suppose your friend Sam is purchasing a commercial building for $221,500. He made a down payment of $30,000. Rest of the amount is financed at a fixed rate of 5% annually for 20 years. What is the monthly mortgage payment? So now we know that Sam is purchasing a commercial building for $221,500. So the purchase price will be equal to $221,500. The rate of interest is equal to 5% annually. The time period is equal to 20 years and the down payment is equal to $30,000. So now with all this information we shall find the monthly mortgage payment. So here our first step is to find the amount financed. The amount financed is equal to purchase price minus down payment. So here the amount financed will be equal to purchase price that is $221,500 minus the down payment that is $30,000. Which is equal to $191,500. So our next step is to find the number of $1,000 units which is calculated by amount financed upon $1,000. So here the number of $1,000 units is equal to amount financed that is $191,500 upon $1,000 which is equal to $191.5. Our next step is that from the table we will locate the table factor for given annual rate of interest and number of years financed. This table factor is a monthly payment per $1,000 financed. So here is a table showing the rate of interest and the number of years. Now here time period is equal to 20 years. So we first locate 20 years in the table. Also the rate of interest is equal to 5% annually. So in the first column we locate 5%. Now the value corresponding to the rate of interest 5% and the time 20 years is the table factor. So here it is 6.60. So the table factor is equal to 6.60. So now lastly we calculate the monthly mortgage payment which is equal to number of $1,000 units into the table factor. So here the monthly mortgage payment will be equal to number of $1,000 units that is $191.5 into the table factor that is 6.60 which is equal to $1,263.9. So monthly mortgage payment for Sands loan is equal to $1,263.9. Now we shall discuss how to calculate monthly mortgage payment for fixed rate using formula. We use the following formula to calculate monthly payment for fixed rate mortgage. That is monthly payment is equal to P into R upon 1 minus 1 plus R the whole raised to power minus n. Where P is equal to the principal amount or the amount financed. R is equal to the monthly rate of interest in decimals and n is equal to total number of payments. Using the same example we calculate the monthly mortgage payment using the formula. Here we had calculated the amount financed which was equal to $191,500. So here the principal amount that is P is equal to $191,500. Rate of interest was equal to 5% annually that is 5 upon 100 which is equal to 0.05. So monthly rate of interest will be equal to 0.05 upon 12. That means R will be equal to 0.00416. The time period was equal to 20 years. So as there were monthly payments so total number of payments that is n will be equal to 12 into 20 which is equal to 240. So now we put all the values in the formula P into R upon 1 minus 1 plus R raised to power minus n. Which will be equal to $191,500 into 0.00416 upon 1 minus 1 plus 0.00416 the whole raised to power minus 240. That is equal to $191,500 into 0.00416 upon 1 minus 1.00416 raised to power minus 240. So now for such a large calculation we use a calculator and find 1.00416 raised to power minus 240 will be equal to 0.3692. This implies monthly payment will now be equal to $191,500 into 0.00416 upon 1 minus 0.3692. Which is equal to $191,500 into 0.00416 upon 0.6308. Again using calculator this is equal to $1,262.9. Thus using formula monthly mortgage payment for SAM's loan is $1,262.9. So in this session we have discussed about mortgage loans and also launched to calculate monthly mortgage payments for fixed rate mortgage loan. This completes our session. Hope you enjoyed this session.