MORTGAGEE
& MORTGAGOR INTERESTS
david hornby
The
elements under this standard are:

interpret outcomes of analysis

analyse data on subject mortgage

determine mortgagee's or mortgagor's interests value

record value, analytical approaches used and qualifications required.
MORTGAGE
REPAYMENTS
Compound
formulae can be used to determine the repayments of a real estate
mortgage. The formula used is derived from the present value of 1 pa
(PVPMT) because mortgage repayments can be equated to rent (PMT), and
the loan amount to the market value or present value of an investment
property (PV).
EXAMPLE
Determine
the mortgage repayments for a home loan of $400 000 over 20 years at
12% pa:
STEP
1:
Determine
PVPMT:
PVPMT
= (1 PV)/ (i/100)
=
(1 0.1037)/0.12
=
7.469
7.469
is the PV of $1 per annum.
STEP
2:
Determine
the mortgage repayments:
What
is the payment (PMT) for a PV of $400 000?
Using
proportions:
PMT:
400 000 = 1: 7.469
Therefore:
PMT
= 400 000/7.469 = $53 550 pa
MORTGAGEE'S
INTEREST (MEEI)
As
well as the lessee and lessor, the mortgagee and mortgagor have an
interest in a mortgaged property.
EXAMPLE
Determine
the mortgagee and mortgagor interests in the above house at the end
of 5 years.
The
mortgagee's Interest is the PVPMT of the remaining future loan
repayments.
After
5 years the mortgagor will owe 15 years of repayments:
STEP
1:
Determine
the PVPMT for n =15
PVPMT(15)
= (1 0.1827)/0.12 = 6.811
STEP
2:
Multiply
by the mortgage repayments
PVPMT(53
550)
=
6.811 * 53 550 = $364 730
Therefore,
the mortgagee's interest is $364 730 which is the amount owing on the
loan at the end of 5 years.
MORTGAGOR'S
INTEREST (MORI)
The
mortgagor's interest in the property is market value less the
mortgagee's Interest.
If
the market value
=
$500 000
Deduct
mortgagee's interest
=
$(364 730)

$135
270 = MORTGAGOR'S INTEREST
The
mortgagor is able to obtain a second mortgage on this interest.
See
annual rental equivalent (ARE)
See
fines
See
equivalent cash price