Question

**13. Mortgage payments**

Mortgages, loans taken to purchase a property, involve regular payments at fixed intervals and are treated as reverse annuities. Mortgages are the reverse of annuities, because you get a lump-sum amount as a loan in the beginning, and then you make monthly payments to the lender.

You’ve decided to buy a house that is valued at $1 million. You
have $200,000 to use as a down payment on the house, and want to
take out a mortgage for the remainder of the purchase price. Your
bank has approved your $800,000 mortgage, and is offering a
standard 30-year mortgage at a 9% fixed nominal interest rate
(called the loan’s annual percentage rate or APR). Under this loan
proposal, your mortgage payment will be **1._______**
per month. (Note: Round the final value of any interest rate used
to four decimal places.)

Your friends suggest that you take a 15-year mortgage, because a
30-year mortgage is too long and you will pay a lot of money on
interest. If your bank approves a 15-year, $800,000 loan at a fixed
nominal interest rate of 9% (APR), then the difference in the
monthly payment of the 15-year mortgage and 30-year mortgage will
be **2.**_____ ?(Note: Round the final value of any
interest rate used to four decimal places. )

It is likely that you won’t like the prospect of paying more money each month, but if you do take out a 15-year mortgage, you will make far fewer payments and will pay a lot less in interest. How much more total interest will you pay over the life of the loan if you take out a 30-year mortgage instead of a 15-year mortgage?

**$1,096,664.83**

**$1,010,987.89**

**$856,769.40**

**$1,182,341.77**

Which of the following statements is not true about mortgages?

**Every payment made toward an amortized loan consists of
two parts—interest and repayment of principal.**

**The ending balance of an amortized loan contract will be
zero.**

**If the payment is less than the interest due, the ending
balance of the loan will decrease.**

**Mortgages are examples of amortized loans.**

Answer #1

13. Mortgage payments
Mortgages, loans taken to purchase a property, involve regular
payments at fixed intervals and are treated as reverse annuities.
Mortgages are the reverse of annuities, because you get a lump-sum
amount as a loan in the beginning, and then you make monthly
payments to the lender.
You’ve decided to buy a house that is valued at $1 million. You
have $300,000 to use as a down payment on the house, and want to
take out a mortgage...

15. Mortgage payments
Mortgages, loans taken to purchase a property, involve regular
payments at fixed intervals and are treated as reverse annuities.
Mortgages are the reverse of annuities, because you get a lump-sum
amount as a loan in the beginning, and then you make monthly
payments to the lender.
You’ve decided to buy a house that is valued at $1 million. You
have $250,000 to use as a down payment on the house, and want to
take out a mortgage...

Mortgages, loans taken to purchase a property, involve regular
payments at fixed intervals and are treated as reverse annuities.
Mortgages are the reverse of annuities, because you get a lump-sum
amount as a loan in the beginning, and then you make monthly
payments to the lender.
You’ve decided to buy a house that is valued at $1 million. You
have $350,000 to use as a down payment on the house, and want to
take out a mortgage for the remainder...

You are considering the purchase of a $600,000 house using a
regular fixed rate mortgage loan with a 20% down payment; what is
the monthly payment (not including taxes and insurance) using a
30-year (5.0%), 20-year (4.50%), and a 15-year (4.00%)? How much
total interest would you pay using the three different loans over
the course of the loan? What are the pros and cons of using a 5/1
adjustable rate mortgage?

You take out standard 30-year mortgage with fixed monthly
payments to purchase your house. The mortgage is for $250,000 with
a nominal annual rate of 4.6% (Monthly compounding). Each month,
you send in a check for $1,403.81, which is above the required
payment, where the excess payment directly reduces the outstanding
balance each month. What portion of your payments in months 25-36
go towards interest?

I have a choice between two different fixed-rate mortgages when
I purchase my $150,000 house. One is a 20-year mortgage with a
quoted rate of 4.375% and the other is a 30-year mortgage with a
quoted rate of 4.5%. Both rates are monthly compounded, and both
mortgages require equal monthly payments. What is the required
monthly payment of each loan? How much of a down payment would I
have to make if I wanted the 20-year loan’s payment to be...

You have just sold your house for $1,000,000 in cash. Your
mortgage was originally a 30-year mortgage with monthly payments
and an initial balance of $800,000. The mortgage is currently
exactly 18½ years old, and you have just made a payment. If the
interest rate on the mortgage is 5.25% (APR), how much cash will
you have from the sale once you pay off the mortgage?
Sale
price
$
1,000,000
Initial balance
$
800,000
Number of years
30
Periods...

Suppose you are buying a house and have taken out a mortgage for
$250,000. The mortgage is a 30 year fixed rate mortgage with an APR
of 5.25%. What is your monthly mortgage payment?

You plan to purchase a $390,000 house using either a 30-year
mortgage obtained from your local savings bank with a rate of 8.50
percent, or a 15-year mortgage with a rate of 7.55 percent. You
will make a down payment of 20 percent of the purchase price. a.
Calculate the amount of interest and, separately, principal paid on
each mortgage. What is the difference in interest paid? b.
Calculate your monthly payments on the two mortgages. What is the
difference...

You are purchasing a new home and need to borrow $325,000 from a
mortgage lender. The mortgage lender quotes you a rate of 6.5% APR
for a 30-year fixed-rate mortgage (with payments made at the end of
each month). The mortgage lender also tells you that if you are
willing to pay one point, they can offer you a lower rate of 6.25%
APR for a 30-year fixed rate mortgage. One point is equal to 1% of
the loan value....

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