Question

Mr. and Mrs. Spirit purchased a $35,000 house 20 years ago. They took a 30-year mortgage for $30,000 at a 3% annual interest rate. Their bank, the First Amityville National Bank, has recently offered the Spirits two alternatives by which they could prepay their mortgage. The Spirits have just made their 20th annual payment.

[A] Under the first alternative, the Spirits could prepay their mortgage at a 30% discount from the current principal outstanding. If current 10-year mortgage rates are 12%, should the Spirits accept the offer? Ignore taxes and assume payments are made at the end of each year (instead of monthly).

[B] The second alternative would replace their existing mortgage with a five-year zero-interest loan, in the amount of their current mortgage's principal outstanding. This new loan was to be repaid in 5 equal annual payments. The banker pointed out that this option would "save them well over $2,000 in interest."

**Which alternative, if either, should the Spirits
pursue?**

Answer #1

Exactly 18 years ago, you took out a $550,000 30-year mortgage
with monthly payments and
an APR of 10% compounded monthly. You have just made your 216th
payment. What is the
outstanding balance on your loan?

John and Peggy recently bought a house. They financed the house
with a $125,000, 30-year mortgage with a nominal interest rate of 7
percent. Mortgage payments are made at the end of each month. What
total dollar amount of their mortgage payments during the first
three years will go towards repayment of principal?

Mortgage ProblemConsider a 20-year mortgage for $350,000 is
taken out in Jan. 2019 at a 5.40% annual interest rate.
a.What is the Payment Amount for this mortgage? (2)
b.What total amount will be paid by the borrower over the
20-year payback period? (2)
c.What is the Interest / Principle breakdown for payment #5?
(2)
d.If a $250 per month prepay is made starting with payment #1
and continuing to the end of the payment period, how much interest
is saved?...

We have a 10-year mortgage for $300,000 at 9.75% p.a. It is to
be repaid in monthly repayments.
(a) What is the repayment amount? Assume the interest is
compounded monthly. Which formula should you use to solve this
problem?
(b) What is the balance outstanding after two years? How much
principal and how much interest have been paid?
(c) After two years, the interest rate falls to 9.25% p.a. What
prepayment penalty would make it unattractive to prepay the
loan?...

John recently bought a house, and he financed it with a
$250,000, 30-year
mortgage with an annual interest rate of 7 percent. The mortgage
payments are
made at the end of each year. What total dollar amount of the
mortgage
payments during the first three years will go towards paying
interest?

It’s been exactly five years since Mr. Smith bought his house
with a 30-year mortgage which had an interest rate of 9.00% (APR,
monthly compounding). The outstanding balance of the current
mortgage is $178,799.01. In the intervening five years, interest
rates have fallen and so Mr. Smith has decided to refinance the
remaining balance on his current mortgage with a new 32-year
mortgage which has monthly payments and an interest rate of 5.7%
(APR, monthly compounding). How much would the...

ONLY ANSWER F AND G
1. Mortgage Problem
Consider a 20-year mortgage for
$350,000 is taken out in Jan. 2019 at a 5.40% annual interest
rate.
a. What is the Payment
Amount for this mortgage? (2)
b. What total
amount will be paid by the borrower over the 20-year payback
period? (2)
c. What is
the Interest / Principle breakdown for payment #5?
(2)
d. If a $250
per month prepay is made starting with payment...

Adam Wilson just purchased a home and took out a $250,000
mortgage for 30 years at 8%, compounded monthly.
a. How much is Adam’s monthly mortgage payment?
b. How much sooner would Adam pay off his mortgage if he made an
additional $100 payment each month? The financial tables in
Appendix A are not sufficiently detailed to do parts (c) and
(d).
c. Assume Adam makes his normal mortgage payments and at the end
of five years, he refinances the...

A house is for sale for $640,000. You have a choice of two
30-year mortgage loans with monthly payments: Loan 1: Receive
$590,000 at 7% with 30-year maturity or Loan 2: Receive $540,000 at
6% with 30-year maturity. What is the effective annual rate of
interest on the additional $50,000 borrowed on the first loan?

When you purchased your house, you took out a 30-year
annual-payment mortgage with an interest rate of 10% per year. The
annual payment on the mortgage is $14,909. You have just made a
payment and have now decided to pay the mortgage off by repaying
the outstanding balance.
a. What is the payoff amount if you have lived in the house for
18 years (so there are 12 years left on the mortgage)?
b. What is the payoff amount if...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 27 minutes ago

asked 46 minutes ago

asked 56 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago

asked 2 hours ago

asked 2 hours ago

asked 3 hours ago