Question

You received an investment opportunity in real estate. The required investment amount is $1,000,000. Since you...

You received an investment opportunity in real estate. The required investment amount is $1,000,000. Since you do not have enough money, you are searched for partners. You found one friend who would like to enter the investment. Although she does not have the necessary funds today, she promises to transfer $400,000 in 4 years.

Accordingly, you have decided to take two loans:

1) A 4-year bullet loan with an annual stated interest rate (APR) of 6.6% compounded monthly. The loan will be paid in a single payment equal to $400,000 (for the interest and principal) at the end of the fifth year;

2) A 25-year mortgage for the remaining required funds to purchase the house. The mortgage has an annual stated interest rate (APR) of 6% and will be repaid in equal monthly payments over the next 25 years.

What is your monthly mortgage payment?

Homework Answers

Answer #1

For the 4-year bullet loan (assuming the repayment of the loan at the end of fourth year, & not fifth year which seems to be a mistake as it is a 4 year loan)

monthly rate = 6.6%/12 =0.0055

No of months = 4*12 = 48

So, the amount A which can be borrowed is given by

A = 400000/(1+0.0055)^48

=$307411.70

Remaining amount to be borrowed in 25 year mortgage = $1000000 - $307411.70 = $692588.30

monthly rate = 6%/12 =0.005

No of months = 25*12 = 300

So, the equal monthly payments (B) over the next 25 years.is given by

A/0.005*(1-1/1.005^300) = 692588.30

A =$4462.36

monthly mortgage payment = $4462.36

.

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
1. Sarah is planning to purchase her own home as her first real estate investment. The...
1. Sarah is planning to purchase her own home as her first real estate investment. The home is selling for $200,000 and she needs a 20% down payment. The loan will be for 30 years at 3.5% interest. What is Sarah’s monthly payment? How much money would Sarah save over the life of the loan if she obtained a 15-year loan at the same rate? If Sarah did not have the down payment and could save $850 per month at...
S & S Air Case Study- Assessing Mortgage loan options Mark Sexton and Todd Story, the...
S & S Air Case Study- Assessing Mortgage loan options Mark Sexton and Todd Story, the owners of S&S Air, Inc., were impressed by the work Chris had done on financial planning. Using Chris's analysis, and looking at the demand for light aircraft, they have decided that their existing fabrication equipment is sufficient, but it is time to acquire a bigger manufacturing facility. Mark and Todd have identified a suitable structure that is currently for sale, and they believe they...
Mark Sexton and Todd Story, the owners of S&S Air, Inc., were impressed by the work...
Mark Sexton and Todd Story, the owners of S&S Air, Inc., were impressed by the work Chris had done on financial planning. Using Chris's analysis, and looking at the demand for light aircraft, they have decided that their existing fabrication equipment is sufficient, but it is time to acquire a bigger manufacturing facility. Mark and Todd have identified a suitable structure that is currently for sale, and they believe they can buy and refurbish it for about $40 million. Mark,...
Steve is buying home that costs $500,000. You have been offered a 30-year mortgage that requires...
Steve is buying home that costs $500,000. You have been offered a 30-year mortgage that requires a 20% down payment for the house. The loan is to be repaid in equal monthly installments. The APR of the mortgage is 4%. Compute the EAR and the amount of your monthly payment on the mortgage. Show all calculations. you need to find the amount of the monthly payment in two different ways: 1) using the built-in Excel function 2) using the annuity...
You invested in the real estate in Dresden/Germany and bought the house in the center of...
You invested in the real estate in Dresden/Germany and bought the house in the center of the city. The banks currently offer a very low-interest rate and you decided to refinance your mortgage. The current monthly payment is $2,100, and there are exactly 22 years left on the loan. The mortgage interest rate on your existing loan is 9% APR. How much do you owe on the mortgage today? Do you think prices are reasonable in Dresden? Compare with the...
You have just sold your house for $1,000,000 in cash. Your mortgage was originally a 30-year...
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...
You need a 20-year, fixed-rate mortgage to buy a new home for $180,000. Your mortgage bank...
You need a 20-year, fixed-rate mortgage to buy a new home for $180,000. Your mortgage bank will lend you the money at a 6.6 percent APR for this 240-month loan. However, you can afford monthly payments of only $950, so you offer to pay off any remaining loan balance at the end of the loan in the form of a single balloon payment. Required: How large will this balloon payment have to be for you to keep your monthly payments...
Your real estate agent mentions that homes in your price range require a payment of $1,200...
Your real estate agent mentions that homes in your price range require a payment of $1,200 per month for 30 years at 9% interest compounded monthly. What is the size of the mortgage with these terms? A loan officer states, "Thousands of dollars can be saved by switching to a 15-year mortgage from a 30-year mortgage." Calculate the difference in payments on a 30-year mortgage at 9% interest versus a 15-year mortgage with 8.5% interest. Both mortgages are for $100,000...
you borrowed $500,000 to buy a house. The mortgage rate s 24% (APR, monthly). The loan...
you borrowed $500,000 to buy a house. The mortgage rate s 24% (APR, monthly). The loan is to be repaid in equal monthly payments over 30 years. 29 years has passed. How much you owe to the bank on your home (loan principal) since you have 1 year left from your mortgage? Assume that each month is equal to 1/12 of a year.
The mortgage on your house is five years old. It required monthly payments of ​$1,402, had...
The mortgage on your house is five years old. It required monthly payments of ​$1,402, had an original term of 30​ years, and had an interest rate of 10%​(APR). In the intervening five​ years, interest rates have fallen and so you have decided to refinancethat ​is, you will roll over the outstanding balance into a new mortgage. The new mortgage has a​ 30-year term, requires monthly​ payments, and has an interest rate of ​6.625%(APR). a. What monthly repayments will be...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT