Question

1. You are planning to buy a $200,000 house using a 30-year mortgage that requires equal monthly payments starting one month from today. Annual interest rate is 6.6%, compounded monthly.

1. Calculate your monthly payments.
2. How much have you paid off the mortgage after 10 years?
3. Suppose you are planning to refinance this mortgage after 10 years at an annual interest of 4.8%, compounded monthly, for the remainder of the term. However, you are going to be charged a 10% prepayment fee. Calculate your monthly payments and state whether you should refinance or not.
4. Suppose you are offered a teaser rate with this mortgage. Annual interest rate is going to be 1.2%, compounded monthly, for the first 7 years and then become 12%, compounded monthly, for the remainder of the term. Calculate your monthly payments for the first 7 years and the remainder of the term.

Answer 1

House price is $ 200000

Loan tenure is 30 yrs

Rate of interest is 6.6% monthly annually is 79.20%p.a

Calculation of monthly payments is 13200$

annual instalments is158400$

B. After 10 yrs mortgage is 13206$

C. After 10 yrs if we switch at 4.80% rate of interest then we have to pay 10% pre payment fees

principal after 10 yrs is 133333/- *10% is 13333/- pre payment chgs

Not worthable because pre payment chgs is more than interest

D. MONTHLY PAYMENTS IS

1.2% *12 = 14.40% ANNUALLY

12% IS 84% ANNUALLY

EMI IS 3792+14000 = 17792/- EMI