Lesson 6 : MORTAGES

• A Mortage is probably the biggest

loan one can have . It is usually
obtained for a house , a house and
lot , or for a machinery or
equipments. Today , the internet has
what is called a mortage
amortization calculator that helps
would be home owners.
• They just enter the location , the
amount of the loan , term , and the
APR , and it will give the amount of
their monthly payment , the total
of the payments for the entire term
of the loan , and the payoff date or
the date that they will have fully
paid the loan . In addition , there
are sites that let you print your own
amortization schedule.
 Lesson Objectives
• At the end of this lesson , the
students should be able to :
• 1. Comprehend what mortage
is ;
• 2. Compute fir the down
payment on a mortage and the
amount of the mortage loan
• 3. Deternine how payment is
applied to interest and princial ,
and determine the balance of
the loan after each payment ;
• 4. Prepare an amortization table
; and
• 5. Solve problems involving
mortages.
 Lesson Pre assessment

• You are planning to buy a

house and lot and secure a
mortage given that the price of
the house and lot is
Php 2 400 000.00. The real
estate dealer is asking for 20%
down payment.
• A. How much is the down payment ?
• B. How much would be the amount
of the mortage loan ?
• C. Assume that you arw to pay Php
14,389.21 monthly interest rate of
6%.
• D. How much would go to the
interest and how much to the
principal ?
 Down Payment and Mortage Loan :

• Mortatage loan is when ou use your

property as collateral for a loan from
a financial institution . For most
installer purchases , a down payment
is generally required. It is usually a
certain percent of the purchases
price . At most basic level , a
property mortage involves payment
of the purchases price for the
property and interest on the loan.
• The down payment is usually a
certain percent of the purchase
price of the property. This is
generally called buyer's equity.
Assume that you wish to
purchase a secondhand car
worth Php 312,500.00 and the
seller requires a 20% down
payment .
• To compute for the down
payment :
• Down payment = Purchase
price X Down payment %
= Php 312,500 X 20%
= Php 62,500
• Therefore , if you pay the
20% down payment , the
a,ount of the mortgage
loan would be the balance
after the down payment
has been deducted from
the purchase price.
• Mortgage loan = Purchase
price - Down payment
= Php 312 500 - Php 62 500
= Php 250 000
Term of the Loan : Total Number of Payments

• The installment payment on the

loan is termed amortization . The
schedule prepared showing the
instllment payments for the
period of payment ( called the
term of the loan ) is called
amortization table. In our
example ,
• assume that you have to make
one payment per month for 30
years . 30 years is the term of the
loan . Thirty years multiplied by
12 months per year will give you
360 , meaning , you have to make
360 monthly payments to be able
to fully pay your loan.
 Monthly Payment
• If there were no interest rate ,
determining your monthly rate
would be simple . Divide the loan
amount by the number of
payments ( php 250 000 / 360 =
Php 694.44 ).
• However , the bank has to make
money so the bank will collect
interest. Asume that the bank will
charge you 5% is what is termed
as the annual percentage rate or
APR to a monthly rate. We divide
5% by 12 get 0.41667% (5% / 12 =
0.416% ) To determine the
monthly payment , we use the ff.
formula :
A = ixPx(1+ i )n Divide (1+ i )n – 1
Where A is the monthly payment
P is the loan’s initial amount

I is the monthly interest

rate ; and
N is the total number of
payments
Using our example ,
A = (0.00416) (Php 250 000 ) x (1 +
.00416 )360 divide (1 + .
00416)360 – 1
 
Myamortizationchart.com can
help people preparing an
amortization table.
• An amortization schedule is
a table or chart showing
each monthly payment on
an amortizing loan
indicating how much of
each payment goes to
interest and how much
goes to principal .
• As the amount that goes to
interest decreases as
payment is made the
amount that goes to the
principal increases . The
amortization table
generally applies to fixed
mortgages / loans .
• Taking our example , a
secondhand car is worth
Php 312 500 w / a 20%
down payment. Your bank
agreed to provide you w / a
Php 250 000 mortgage at a
fixed interest rate of 5 %
for 30 years .
• What is your monthly
payment ? how much
money are you paying
toward interest and
principal each
month ?
• The amount of the loan is
Php 250 000 , which is the
principal . If we pay
Php1,342.05 for 360 months ,
that will total to Php 483 138.
Therefore , if we deduct the
amount of the loan from the
total payments ( 482,138 –
250,000 )
the amount of interest that you
will have to pay for the entire
term of the loan would be Php
233 138 . Note that it is very
expensive to get a mortgage loan
bec . ,as you can see , even if the
interest is only 5% per month you
almost double the amount of
your loan.
 Amortization Table
• Even though monthly payment is
fixed, the amount of money paid to
interest and principal varies each
other month. For the first payment ,
to determine what portion of the
Php 1 342.05 goes to interest , we
multiply the principal balance of Php
250 000 by that monthly interest rate
of 0.0041667 to get Php1 041.67 .
• Therefore , deducting Php 1
041.67 from Php1342.05
payment , it will resu;t in Php
300.38 only . Deducting the
Php 300.38 from Php 250
000 ,the new balance of the
mortgage loan will now be Php
249 669.62.
• For the second month , we
multiply the Php 249
669.62 by the interest rate
of 0.0041667 to get Php 1
040.30 for the interest
portion will then be Php 1
342.05 – Php 1 040.30 =
Php301.75.
• If we continue this process , we
can develop an amortization table
; but this being tedious , the use
of the amortization schedule
calculator in the internet is
usually resorted to. The ff. partial
amortization schedule applies to
our example as contained in the
website myamortization.com
• This process of calculating
interest based on the remaining
balance continues until the
mortgage is paid off. So in each
month , the amount of interest
declines and the amount going to
paying off the loan increases
.After 360 oayments , the
mortgage is fully paid off.
• Oftentimes , mortgage payments
for house and lot include fees
assiociated with legal obligations
of owning a home , like taxes and
insurance , and private mortgage
insurance ( PMI ) . to ensure you
keep the real estate taxes and
PMI current lenders typically set
up an escrow acc.
• The portion of your monthly
mortgage payment
associated with taxes and
insurance will be held in
escrow until it is due
sometimes , once a year such
as with real estate taxes .
• Assume that our example is for a
house and lot. If we know that
the pro-rated real estate tax is
Php 500 and the private
mortgage insurance is Php 500 ,
we add the Php1000 to the
Php1,342.05 to come up wuth
the monthly payment of
Php2,342.05.
• In as much as the real estate
tax and private mortgage
omsiramce are mot par of
payment for the basic house
and lot price , our computation
for the portion going to the
interest and the portion going
to the principal still applies .
• If you make additional
payment of , say , Php 100
every month , your interest
will go dow and a bigger
portion then goes to principal .
Therefore , the principal
balance is reduced by Php100
to reduce the interest.
• It does not seem like much of
a difference , but if you do that
every month , you will have
more than 5 years off your
repayment term and save
more than Php 30,000 in
interest over the life of the
loan.
 Let’s Share ideas :
• Assume a house and lot
priced at Php 1 300 000 is
asking for a 25% down
payment and an APR of
5% with a term of 30years.
1. Using manual computation ,
prepare the first 12 months of
amortization schedule .
2. Consult the internet on the
monthly amortization schedule
and see if your computation in
no.1 above is correct.
 Lesson Summary
• Mortgage loan is when you use your
property as collateral for a loan from a
financial institution . The installment
payment on the loan is termed
amortization .
• For most installment purchases , a down
payment is generally required . It is
usually a certain percent of the purchase
price . This is generally called the buyer’s
equity.
• To compute for the monthly payment
, the ff. formula is used :
• A = ixPx(1 + i )n divide (1 + i )n-1
• The monthly amortization payment
goes to the payment of interest and
principal . At the earlier life of the
loan , more goes to the interest. As
the principal is reduced , the interest
goes down and the portion applying
payment of the principal increases.
1. The cash price of a dining romm
set is Php 1 920.00 . Myrna buys
it on an installment basis . She
pays 12 monthly installments of
Php 174.40
A. What is the total amount she
paid ?
B. How much finance charge did
she pay ?
2. A brand new car has a list price of
Php850,000.00 . The car dealer is
giving a trade discount of 10% and
requires a 20% down payment . The
car dealer has an arrangement with a
bank to finance the balance on the
car . The term of the loan is 5 years .
The bank is charging an interest of
6% per annum.
A. Compute the net invoice price of the
car
B. Compute the down payment needed
and the balance that will have to be
financed by the bank.
C. How much will the monthly payment
be ? what portion of the monthly
payment for the first month will go to
interest and to principal ? what about
for the second monthly payment ?
D. Prepare an amortization
schedule manually for the first
half of the first year on a
separate sheet.
E. Using Excel , prepare the
amortization schedule for the
first half of the first year .
3. A three-burner mixed range with
electric oven has a list price of Php
29 880.00 and a trade discount of
5% . The seller calls for a 30%
discount with the balance payable
in a year at 1% per month interest
rate . Find :
A. Net invoice price
B. Down payment
C. Principal balance
D. Monthly payment
E. Prepare manually the amortization
schedule for the first 6 momths on a
separate sheet.
F. Using Excel , prepare the amortization
schedule for the first 6 months.
4. A 21 cu ft refrigerator is priced at
php 46, 795 . The seller is willing to
give it installment for 2 year term at
8% interest for a 15% down payment.

A. Prepare manually your amortization

schedule for the first 6 months on a
separate sheet.
C. Using Excel , prepare the
amortization schedule for the first 6
months.
5. A secondhand Toyota Coralla car is priced
at P320 000.00 net. The owner is asking for a
30% down payment and an installment term
for 3years at a monthly interest rate of ½%.

A. Prepare manually the amortization

schedule for the 1st year on a separate sheet.
B. Using excel, prepare the amortization
schedule for the full term of the loan.
6. A brand new house and lot at
a well-known subdivision is
priced at P3.5M requiring a
down payment of 20%. The
financing company charges an
interest of 12% for a term of
20years
A. Prepare manually the amortization
schedule on a separate sheet for the 1st
year of the loan.

B. Excel, prepare the amortization schedule

for the full term of the loan.

C. Compare to you’re amortization

schedule with one found in the Internet.
Make sure you note the website you got
your schedule. Compare it with your
classmates.
Lesson 7 : Commissions
and overrides
• Salesmen , agents , and brokers
are generally paid commissions
as incentives for increasing a
firm’s sales . Salesmen are
employees of the firm either paid
on a straight commission basis or
on a salary plus commission basis
. Agents and brokers are generally
not employees of the firm and
paid commission only .
• Marketing and / or product
managers are generally paid
overrides on the sales of people
under them. Override , also applies
when a different commission rate is
applied if a certain target is reached.
For example , the commission rate
may be 2% of sales , but retroactively
, changes to 4% if the sales agent
attains a certain quarterly sales goal .
• In this sense , an override is an
incentive for a sales agent to reach
his or her goal . However , for
business math purposes ,
commissions granted to sales
agents , whether they reach their
goal or not will be commission , and
override will apply to commission
given to marketing managers or
product managers for the sales of
people under them
• If sales a agent earns a basic
monthly salary of 10 000 pesos
and is paid a 3% commission on
all his or sales for the month , he
or she will have a gross earnings
of basic salary plus commission .
If he or she sold 30 000 pesos for
the month , her gross earnings
and commission will be :
• Gross Earnings = Basic Salary
+ Commission
• 10 000 PESOS + 3% X 30 000
PESOS
• = 10 000 PESOS + 900 PESOS
• = 10 900 PESOS
•Lesson Objectives
•At the end of this lesson , students will be
able to :
•Differentiate commission from override ;
•Compute for commission earned on
particular cash sale ;
•Compute for commission earned on an
installment sale ; and
•Solve for gross earnings involving salary ,
commission , and override .
 Lesson Pre assessment
1. Roger works as a sales agent for
the Hardworking Trading and earns
a basic monthly salary of 8000
pesos plus 5% commission on all his
sales . IF he made total sales of 50
000 pesos for the month , find his :
a. Commission
b. Gross earnings
2. Lito works as a salesman for
Integrity Merchandising . He is
paid a basic salary of 8500 pesos
per month plus 4% commission
on all his sales . For the current
month , he made total sales of 45
000 pesos find his :
a. Commission
b. Gross earnings
 Pain Commission
• Most sales agents earn commissions only .
They are not paid any salary . Therefore
they exert their best effort to increase
their sales because the more they sell , the
more they earn . Computation of the
commission makes use of the basic
formulation we learned , P=BR . The
commission is the percentage ( P ) , the
sales is the (B) , and the commission rate
is the rate ( R ) .
 Examples :
1 . Carmen Yambaog is a sales agent
for the High Ace Reality . She is
paid based on Commission only .
She is given 2% commission on her
sales . For the current month , her
sales was 1 035 000 pesos . Her
commission ( which is also her
gross earnings ) would be :
Commission
= 1 035 000 pesos x 2%
= 20 700 pesos
 Commission and salary
• Generally ,if a person is
employed by a firm as a
salesman , he or she is given a
basic salary in addition to the
commission he or she is given on
his or her sales . His or her gross
earning , therefore , are equal
to :
 Gross earnings = Basic Salary +
Commission
Using our foregoing examples for
commission only , and assuming
that Carmen Yambao and Jed
Montenegro are employees with
basic salary , the gross earnings of
Carmen and Jed would be as
follows :
1. Carmen Yanbao’s gross earnings
assuming a basic salary of 10 000
pesos per month :
Gross Earnings =
Basic Salary + Commissions
= 10 000 pesos + 1 035 000 x 2 %
= 10 000 pesos + 20 907 pesos
= 30 907 pesos
2. Jed Montenegro’s gross earnings
assuming a basic salary of 12 500
pesos per month :
Gross Earnings
= Basic Salary + Commissions
= 10 500 pesos + 1 875 000 x 2.5 %
= 10 500 pesos + 46 875 pesos
= 30 907 pesos
• In certain cases , however , a
sales employee that is given a
basic salary earns commission on
sales above a certain figure . For
example , Eugene Tito is a sales
representative earning a basic
salary of 18 000 pesos a month
plus 3 % commission on his sales
exceeding his quota 15 000 pesos
.
Assume he made a total sales of
36 000 pesos for the current
month. Find his griss earnings .
Given:
* P18 000 Basic salary per month
* 3% Commission on sales above
15 000 pesos ( Sales – Quota )
* 36 000 pesos = Total sales
 Find : Gross earnings
Solution : Gross Earnings = Basic Salary
+ Commission
= 18 000 pesos + 3% (Sales – Quota )
= 18 000 pesos + 3% ( 36 000 pesos –
15 000 pesos )
= 18 000 pesos + 3% ( 21 000 pesos )
= 18 000 pesos + 630 pesos
= 18 630 pesos
Still in certain cases , a sales
employee is paid a basic salary and
a graduated commission based on
his sales above quota . For Example
, Gem Bandivas is paid a basic
salary of 9 400 pesos a month plus
commission on all sales above her
quota of 30 000 pesos a month
according to the ff. schedule :
• 1% on first 20 000 pesos
• 2% on next 20 000 pesos
• 3% on sales above quota
exceeding the foregoing
40 000 pesos
Compute for her gross earning if
she sells a total of 75 360 pesos
for the past month
Given :
Monthly salary = 9 400 pesos
Sales quota = 30 000 pesos
Sales = 75 360 pesos
Commission = see schedule at
the preceding page
 Find : Gross Earnings
• Solution : Let us first solve for the
commission
• Total Sales = 75 360 pesos
• Less Quota = 30 000
• Sales subject to commission
_ = 45 360
pesos
First (20 000 ) x 1% = 200 pesos
Next ( 20 000 ) x 2% = 400 pesos
Balance 5 360 pesos x 3 % = 160.80
Total Commission = 760.80 pesos
Add basic salary = 9 400
Gross Earnings = 10 160.80 pesos
 Overrides
• For people who have people
under them doing the sales ,
overrides are given by their
companies in addition to their
basic salary. Product managers
and sales or marketing
managers eearn overrides :
• M. Coronilia is a product manager
with five sales representatives under
him . The company gives him an
annual salary of 126 000 pesos ;
commission of 5% on his own sales ;
and an override of ½ % on his men’s
sales . Find his gross earnings for the
month if his total sales is 365 500
pesos with his men able to sell a total
of 1 548 236 pesos for the month .
Given :
Annual Salary = 126 000 pesos
His sales = 365 500 pesos
His men’s sales = 1 548 263 pesos
His Commission = 5% of his sales
His Override = ½ % of his men’s
sales
 Find : Gross earnings of M. Coronilia
Solution :
Commission = 5% x his own sales
= 5% x 365 500 pesos = 18 275.00 pesos
Override = ½ % x his men’s sales
= 0.005 x 1 548 263 pesos = 7 741.32 pesos
Basic Salary = Annual Salary
12
= 123 000 = 10 500 pesos
12
Gross Earnings = 36 516.32 pesos
 Transportation Allowance and
Representation Allowance
• In certain cases , managers , and even
salesperson are given transportation
allowance and /or representation
allowance . Just remember that any
allowance given a person is in addition to
the basic salary , commission , and
override that he or she is entitled to . Let
us take the ff example :
• Emmanuel Joshua is a marketing manager
. He earns a basic salary of 12 500 pesos
per month . He earns 3% commission on
his own sales and a 1% override on the
sales of his men . In addition , he is
granted a transportation / representation
allowance of 1 000 pesos per month .For
the current month , his men made a total
sales of 250 000 pesos . Emmanuel Joshua
,ade a total sales of 140 000 pesos . His
gross earnings would be :
Gross Earnings
= Basic pay + Commission+
override + Allowance
= P12 500 + 3%xP140 000 +1% x
P250 000 + P1000
= P12 500 +P4 200+P2 500 +P1 000
= P20 200
Commission on Sales in Installment Basis

• What we have so far are

commission on cash basis , that is
, for cash sales . If the sales are
on installment basis , companies
do not give commission base on
sales Rather , they are given
commission based on collection ,
that is payment made by buyers .
• . Assuming a sale of 120 000
pesos paid in monthly
installments of 10 000 pesos , the
commission is based on the 10
000 pesos payment made by the
buyer . Therefore if the
Commission paid is , say , 3% , the
monthly commission would be
3% x 10 000 pesos = 300 pesos .
 Let’s share ideas :

• 1.Jed is a sales representative .

He is given a monthly salary of
10 000 pesos and a commission
of 8 % on his sales . If he sold a a
total of 128 000 pesos for the
month of july , find his gross
earnings for the month .
• 2. Emmanuel is a marketing manager .
He has four salesman under him . He
earns a basic salary of 15 000 pesos per
month . On his own sales , he is given a
commission of 5% . On his men’s sales ,
he is granted an override of 2% . For
the month of June , his own sales total
75 000 pesos . His men sold a total of
250 000 pesos. Compute for his gross
earnings for the month of june.
 Practice your skills :
• 1 . Abram is a sales
representative receiving an
annual salary of 180 000 plus
commission on all his sales
above quota of 30 000 pesos
in accordance with the ff.
schedule :
• First 30 000 pesos above quota
–½%
• Next 50 000 pesos – 1%
• Next 70 000 pesos – 2%
• Over 150 000 pesos – 3%
• Compute for his gross
earnings if his sales for the
month
• A.P28 500
• B.P37 900
• C.58 200
• D.92 300
• 2. Jan is a sales manager receiving a
monthly salary of 18 000 pesos , a
commission of 5% on his sales , and
a monthly transportation allowance
of 5 000 pesos . He is also given an
override of 1% on his men’s sales .
For the month of August , Jan sold a
total of 110 000 pesos . His men
sold a total of 380 500 pesos.
Compute for his gross earnings .
 Lesson Summary
• Sales agent and brokers are generally
paid commission as incentives for
increasing a firm’s sales . Some of
these sales agents or brokers are
paid solely through commission or
what is termed as plain commission .
Their gross earnings would be their
total commission.
• Other sales agent and brokers are
paid basic pay plus commission .
Their gross earnings would be their
basic pay plus their commission.
• Marketing and / or product
managers are generally paid
overrides on the sales of people ,
gross earnings will e their basic pay
plus commission plus override .
• In certain cases , managers and
salespersosns are given transportation
allowance and / or representation
allowance . Just remember that any
allowance given a person is in addition to
the basic salry , commission and override
that he or she is entitled to .
• If the sales are on installment basis ,
companies do not give commission
based on sales , Rather , they are given
commission based on collection that is ,
payment made by buyers .
 Classroom Excersice 9
• 1. Peter is a broker who earns
commission of 3 ½ % on all
securities sales that he makes.
For the past year , he closed
sales totaling 928 867 pesos .
find the amount of commission
he earned for the year .
• 2. Roger is a sales engineer
receiving a basic monthly
compensation of 13 500
pesos and commission on all
sales of 1% . Compute for
his gross earnings of the
month if he sold 124 580
pesos.
• 3. Alex is a straight commission
salesman . He is given commission
on the basis of the ff. schedule :
• Monthly sales
• Less than 50 000 pesos …… 1%
• 50 000 – 99 999 pesos ……. 2%
• 100 000 – 149 999 pesos .. 3%
• 150 000 pesos and above ... 4%
• Compute for his
commission assuming his
total sales is :
• a. 75 800 pesos
• b. 49 900 pesos
• c. 151 200 pesos
• d. 123 500 pesos
• 4. Moses is a sales representative
receiving an annual salary of 130 000
pesos plus commission on all his
sales above quota of 25 000 pesos in
accordance with the ff. schedule :
• First 30 000 pesos above quota - ½ %
• Next 50 000 pesos – 1%
• Next 70 000 pesos – 2%
• Over 150 000 pesos – 3%
• Compute for his gross
earnings if his sales for the
month :
• a. 24 800 Pesos
• b. 57 600 Pesos
• c. 67 700 Pesos
• d. 120 300 Pesos
• 5. Matt is a Product
Manager earning a semi
monthly salary of 5 500
Pesos . He is given
commission of 2.5% on his
own sales and an override
of 0.5% on his men’s sales .
His men are entitled to a 3.75%
commission on their own sales
and a basic a semi-monthly
salary of 4 000 Pesos. Matt
and his men are transportation
allowance of 2 000 Pesos per
month Compute for the gross
earnings of Matt and each of
his men.
Quiz bonus +2
edmhar
• 1. Maria makes money by commission rates.
She gets 15% of everything she sells. If Maria
sold 23,000 worth of items this month, what is
her salary for the month?
• 2. Paul makes a base monthly salary of
15,000. As a vendor, he must sell 19,000 worth
of items per month. He also makes a 6%
commission on all sales beyond the monthly
quota. If Paul sold 26,600 worth of items this
month, what is his total salary for the month
including base salary and commission to the
nearest dollar?
• 3. Jose makes a base monthly salary of 27,000.
As a vendor, he must sell 30,000 worth of items
per month. He also makes a 10% commission
on all sales beyond the monthly quota. There is
also an additional 10% bonus on top of the
normal commission rate for any sales beyond
39,000. If Jose sold 42,000 worth of items this
month, what is his total salary for the month
including base salary and commission to the
nearest dollar?
• 4. Pearl makes a base monthly salary of $3900.
As a sales manager, she sold 11,000 worth of
items for the month. Her sales agents sold
50,000. She also makes a 6% commission on all
her own sales . There is also an additional 3%
bonus on top of the normal commission rate for
any sales her sales agents makes. How much
did she receive for the month?
• You want to buy a house and lot
worth Php 2,900,000.00. The real
estate dealer is asking for 20% down
payment. You have the money to pay
the required down payment and
secure a mortgage from the bank to
pay the balance. The annual interest
of the loan is 6% and is payable in 25
years. Make an amortization table for
the first year