The Mathematics of Home Mortgages in 1991

Andras Simonovits () and András Boros-Kazai

Eastern European Economics, 1992, vol. 30, issue 3, 21-33

Abstract: It is commonly known that, as of January 1, 1991, changes have taken place in the conditions for repaying housing loans issued at favorable rates of interest. The trade publications paid almost no attention to this topic, and the dailies and weeklies did not even explain such important categories as the real (present) value of the loan or the weighted mean time of servicing the loan. Thus even basic mathematical relationships have not been explained. The primary aim of this article is to remedy these shortcomings. It describes how mortgage payments and the amount of total debt depend on the loan, the length of repayment, and the interest rate. It presents the actual value of the loan and the weighted mean time of servicing the loans. It analyzes the comparative advantages and disadvantages of the laws proposed by the government and the one ratified by the National Assembly. Finally, it gives a brief sketch of a methodically preferable way of servicing loans that indexes the mortgage payment instead of the interest.

Date: 1992
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