California Real Estate Practice Exam

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Study for the California Real Estate Exam with confidence. Engage with interactive questions designed to enhance your understanding of real estate principles, laws, and practices. Prepare thoroughly for your licensing test and ensure you have the knowledge to succeed in your real estate career!

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What is the first month's interest on a fixed rate loan at 7% for 25 years for a home that cost $360,000 with an LTV ratio of 80%?

$1,680
$1,200
$2,000
$1,500

The correct answer is: $1,680

The first month's interest on a fixed rate loan is calculated by multiplying the loan amount by the interest rate and dividing by 12 (representing 12 months in a year). In this case, the loan amount is $360,000 and the interest rate is 7%. Therefore, the first month's interest is $360,000 x 0.07 / 12 = $2,100. However, the LTV ratio is 80%, meaning the borrower only requested a loan of 80% of the home's value. Therefore, the first month's interest is adjusted to 80% of $2,100, resulting in $1,680. Option B is incorrect because it does not take into account the LTV ratio and the fact that it is a fixed rate loan. Option C and D are incorrect as they do not accurately calculate the first month's interest for the given loan amount and interest rate.