Question

A homeowner can obtain on property valued at $250,000, a 30-year fixed-rate mortgage, LTV=90%, at a...

A homeowner can obtain on property valued at $250,000, a 30-year fixed-rate mortgage, LTV=90%, at a rate of 6.0 percent with zero points or at a rate of 5.5 percent with 2.25 points. If she will keep the mortgage for 30 years, what is the net present value of paying the points (to the nearest dollar)?

Homework Answers

Answer #1

step1:
find monthly payment of loan without points

let X be the monthly payment

X * [1-(1+6%/12)^-360]/6%/12 = 250,000

X = 1498.88

step2:

find monthly payment of loan with points

let y be the monthly payment

y * [1-(1+5.5%/12)^-360]/5.5%/12 = 250,000

y = 1419.47

difference between the monthly payments = 1498.88 - 1419.47 = 79.41

step3:

Net present value of points = Present value of sum of montly payment saved - value of points payed

= 79.41 * [1-(1+5.5%/12)^-360]/5.5%/12 - (0.025 * 250000)

= 7735.83

= $7736 .....ans

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A homeowner can obtain a $250,000, 30-year fixed-rate mortgage at a rate of 6.0 percent with...
A homeowner can obtain a $250,000, 30-year fixed-rate mortgage at a rate of 6.0 percent with zero points or at a rate of 5.5 percent with 2.25 points. If you will keep the mortgage for 30 years, what is the net present value of paying the points (to the nearest dollar)? please show in excel
A homeowner can obtain a $250,000, 30-year fixed-rate mortgage at a rate of 6.0 percent with...
A homeowner can obtain a $250,000, 30-year fixed-rate mortgage at a rate of 6.0 percent with zero points or at a rate of 5.5 percent with 2.25 points. How long must the owner stay in the house to make it worthwhile to pay the points if the payment saving is not invested?
A homeowner can obtain a $250,000, 30-year fixed-rate mortgage at a rate of 6.0 percent with...
A homeowner can obtain a $250,000, 30-year fixed-rate mortgage at a rate of 6.0 percent with zero points or at a rate of 5.5 percent with 2.25 points. How long must the owner stay in the house to make it worthwhile to pay the points if the payment saving is invested monthly?
a homeowner can obtain a $250,000, 30-year fixed-rate mortgage at a rate of 6.0 percent with...
a homeowner can obtain a $250,000, 30-year fixed-rate mortgage at a rate of 6.0 percent with zero points or at a rate of 5.5 percent with 2.25 points. How long must the owner stay in the house to make it worthwhile to pay the points if the payment saving is invested monthly?
A homeowner can obtain a $250,000, 30-year fixed-rate mortgage at a rate of 6.0 percent with...
A homeowner can obtain a $250,000, 30-year fixed-rate mortgage at a rate of 6.0 percent with zero points or at a rate of 5.5 percent with 2.25 points. How long must the owner stay in the house to make it worthwhile to pay the points if the payment saving is not invested? SHOW IN EXCEL PLEASE
A homeowner can obtain a $250,000, 30-year fixed-rate mortgage at a rate of 6.0 percent with...
A homeowner can obtain a $250,000, 30-year fixed-rate mortgage at a rate of 6.0 percent with zero points or at a rate of 5.5 percent with 2.25 points. How long must the owner stay in the house to make it worthwhile to pay the points if the payment saving is not invested? show in excel please
A homeowner can obtain a $250,000, 30-year fixed-rate mortgage at a rate of 6.0 percent with...
A homeowner can obtain a $250,000, 30-year fixed-rate mortgage at a rate of 6.0 percent with zero points or at a rate of 5.5 percent with 2.25 points. How long must the owner stay in the house to make it worthwhile to pay the points if the payment saving is invested monthly? please show work
show in excel plz A homeowner can obtain a $250,000, 30-year fixed-rate mortgage at a rate...
show in excel plz A homeowner can obtain a $250,000, 30-year fixed-rate mortgage at a rate of 6.0 percent with zero points or at a rate of 5.5 percent with 2.25 points. How long must the owner stay in the house to make it worthwhile to pay the points if the payment saving is invested monthly?
A homeowner can obtain a $350,000, 30-year fixed-rate mortgage at a rate of 6.0 percent with...
A homeowner can obtain a $350,000, 30-year fixed-rate mortgage at a rate of 6.0 percent with zero points or at a rate of 5.5 percent with 2.5 points. How long must the owner stay in the house to make it worthwhile to pay the points if the payment savings are invested monthly?
You are considering the following options on a $250,000 mortgage: 1) A 15-year 3% fixed-rate; 0...
You are considering the following options on a $250,000 mortgage: 1) A 15-year 3% fixed-rate; 0 points 2) A 15-year 2% fixed rate with 2 points What is the net present value of paying the points if you plan to keep the mortgage for the full 15 years? Use the 2% interest rate to discount the monthly savings. $13,287.24 $10,000 $0 $18,287.24