HOMEWORK MORTGAGES

1. Why are mortgage markets studied as a separate capital market? (1. Tại sao thị
trường thế chấp được nghiên cứu như một thị trường vốn riêng biệt?)
The mortgage markets are studied as a separate capital market because:
 Mortgages are endorsed by the definite piece of landholdings if in case the borrower is
unable to pay the loan amount, the control will be taken by the financial institutions.
 There is no particular size of the primary mortgages.
 In mortgages, there is very little and unaudited information about the borrowers.
 The mortgages generally involve a single investor, whereas the capital market involves many
investors.

Thị trường thế chấp được nghiên cứu như một thị trường vốn riêng biệt vì:
 Các khoản thế chấp được xác nhận bằng phần sở hữu đất xác định nếu trong trường hợp
người đi vay không có khả năng trả số tiền vay thì các tổ chức tài chính sẽ kiểm soát.
 Không có quy mô cụ thể của các khoản thế chấp chính.
 Trong các khoản thế chấp, có rất ít thông tin và chưa được kiểm toán về người đi vay.
 Các khoản thế chấp thường liên quan đến một nhà đầu tư duy nhất, trong khi thị trường
vốn có sự tham gia của nhiều nhà đầu tư.

2. What are the four major categories of mortgages, why are they categorized
separately and what percentage of the overall market does each entail?
The four major categories of mortgages:

1. Home mortgages: used to purchase one to four family dwellings

2. Multi family dwellings: mortgages are used to purchase apartment complexes, townhouses,
and condominiums
3. Commercial mortgages: used to finance the purchase of real estate for business purposes
4. Farm mortgages: used to finance the purchase of farms

1. thế chấp nhà: dùng để mua nhà ở cho một đến bốn gia đình
2. Nhà ở dành cho nhiều gia đình: thế chấp được sử dụng để mua các khu chung cư, nhà phố và
chung cư
3. Thế chấp thương mại: dùng để tài trợ cho việc mua bất động sản vì mục đích kinh doanh
4. Thế chấp trang trại: dùng để tài trợ cho việc mua trang trại
1. Major Mortgage Categories:

 Conventional Mortgages: Not government-backed; include conforming and non-conforming loans.

 Government-Insured Mortgages: Include FHA (Federal Housing Administration), VA (Department of Veterans Affairs), and USDA (U.S. Department of Agriculture) loans.

 Fixed-Rate Mortgages: Interest rate stays the same for the entire loan term.

 Adjustable-Rate Mortgages (ARMs): Interest rate changes over time, based on a financial index.
2. Why Separated: They cater to different borrower needs. Conventional for those with strong credit, government-insured for specific groups (like veterans or low-income buyers), fixed-rate for payment stability,
and ARMs for potentially lower initial rates.
3. Market Share: Varies over time; conventional mortgages often dominate, followed by government-insured loans. Fixed-rate mortgages are usually preferred for their predictability, while ARMs are less common.
The exact percentages fluctuate with market conditions.
3. What is a subprime mortgage? What instrumental role did these mortgages play in
the recent financial crisis?

4/ You plan to purchase a $175,000 house using a 15-year mortgage obtained from
your local bank. The mortgage rate offered to you is 7.75 percent. You will make a
down payment of 20 percent of the purchase
a. Calculate your monthly payments on this mortgage.
b. Calculate the amount of interest and, separately, principal paid in the 60th
payment.
c. Calculate the amount of interest and, separately, principal paid in the 180th
payment.
d. Calculate the amount of interest paid over the life of this mortgage.
5/ You plan to purchase a $150,000 house using a 15-year mortgage obtained from
your local credit union. The mortgage rate offered to you is 5.25 percent. You will
make a down payment of 20 percent of the purchase price. ( LG 7-4 )
a. Calculate your monthly payments on this mortgage.
b. Construct the amortization schedule for the first six payments in details: interests,
principles, balance, payments
6/ You plan to purchase a $220,000 house using a 15-year mortgage obtained from
your bank. The mortgage rate offered to you is 4.75 percent. You will make a down
payment of 20 percent of the purchase price. ( LG 7-4)
a. Calculate your monthly payments on this mortgage.
b. Construct the amortization schedule for the mortgage. How much total interest is
paid on this mortgage?