Are you studying for the UBC Real Estate Exam? Worried about the math questions? Most people fail the exam because they fail the math part. I've taught BC real estate math to hundreds of people and in this article, I will teach you the three most common math mistakes students make. Knowing and avoiding them will instantly improve your math score!
Have you noticed that some questions say “payments are rounded up to the next higher dollar” or “to the next higher ten dollars”? It is easy to skip over those details under exam stress. But forgetting to round the payment can cost you precious exam points! Always pay attention to rounding the payment.
Every time you find a payment ask yourself “Do I need to round this payment?” and read the question again.
Let’s look at this question as an example:
“A mortgage loan with a face value of $100,000 is arranged through a mortgage broker. A commission of $3,500, appraisal fees of $450, as well as survey and legal fees totaling $600 will be deducted from the face value before the funds are advanced to the borrower. Calculate the cost of funds advanced to the borrower, expressed as an effective annual rate (j1), if the loan is written at 7.75% per annum, compounded semi-annually, with monthly payments over a 20-year amortization period and term?”
That is a lot of information to take in! No wonder by the time you get to the end of the solution, you are so excited you finally got the interest rate that you pick that answer right away. Watch out!
This is a very common mistake—if you forget to convert the interest rate to what the question is asking (effective annual rate), you will loose a point.
The trick is that the “before the conversion” rate will almost always be an answer option. This is very sneaky! Watch out and don’t forget to convert your rate.
When you get the interest rate, always ask yourself “Is this the rate the questions is asking for? Do I need to convert?” and read the question again.
This is a big one! It applies to any market value question. Here is an example:
“Susan Jones has offered to purchase a house from a vendor who is willing to provide partial financing. Her offer is $75,000 down payment plus a mortgage of $125,000 at 4% per annum, compounded semi-annually. The loan is to be fully amortized with monthly payments over 20 years. What is the market value of this offer if the market rate for similar mortgage loans is 6.5% per annum, compounded semi-annually?”
This is the Market Value question type and it is the last of the 6 types in my course because it is the most complex. No wonder that by end of it you forget to add the down payment. Also, the amount without the down payment will almost always be an answer option to trick you!
For market value questions, when you get to the end, always ask yourself “Is there a down payment I need to add?” and re-read the question.
Keep these three tips in mind and good luck on the test!