Question

Mortgage ProblemConsider a 20-year mortgage for $350,000 is taken out in Jan. 2019 at a 5.40%...

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? (3)

e.After 18 payments, what is the outstanding loan balance? (2)(Note: This question can be determined computationally by hand using the same method to determine the answer to the previous question. The “AMORT” key on a financial calculator can also be used, as well as the CUMPRINC function in Excel. For details, see the instructor.)

f.If a $30,000 lump sum prepay is made after payment #18, what is the new terminal month of the mortgage in this case? (3)

g.How much total interest will be saved over the life of the mortgage with the lump-sum prepay? (3)

h.Determine the new payment amount if the mortgage is refinanced at 3.60%, after 18 payments were made according to the original terms of the mortgage. (2)

i.What is the new terminal date if the mortgage is refinanced in this case? (2)

j.How much is saved in total interest with the refinancing? (3)

Homework Answers

Answer #1

As per rules I am answering the first 4 subparts of the question

a Payment amount $2,387.88
b Total payment in 20 years $573,091.34
c Opening balance for payment 5 $346,726.46
Interest payment in payment 5 $1,560.27
Principal $827.61
d Newamount with prepayment $2,637.88
Total period of payment 202.45261
Total payment $534,045.81
Interest saved $39,045.53

Workings

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
ONLY ANSWER F AND G 1. Mortgage Problem Consider a 20-year mortgage for $350,000 is taken...
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...
Consider a 20-year mortgage for $350,000 is taken out in Jan. 2019 at a 5.40% annual...
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)
Mr. H issues a 20 year mortgage of $275,000 at an annual interest rate of 4.4%...
Mr. H issues a 20 year mortgage of $275,000 at an annual interest rate of 4.4% to buy a house.The mortgage payments are made annually. 1.What is Mr. H's annual payment of principal and interest? $20,958 $22,425 $18,653 $24,102 2.How much interest does Mr. H pay in the second year of the mortgage? $11,710 $13,467 $12,530 $10,422 3.Suppose that immediately after making the second annual payment, Mr. H has the opportunity to refinance the remaining mortgage balance at an annual...
Mr. and Mrs. Spirit purchased a $35,000 house 20 years ago. They took a 30-year mortgage...
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...
A settlement in a court case awards an individual year end payments for 20 years, with...
A settlement in a court case awards an individual year end payments for 20 years, with the first coming one year from now. These will be deposited into an account earning 3% annual effective interest. The first payment is $4000 and each payment after that is 2% greater than the previous payment. The recipient of this settlement has the option of accepting the present value of this payment stream as a single lump sum payment. What is this lump sum...
A loan officer states, "Thousands of dollars can be saved by switching to a 15-year mortgage...
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 an interest of 0.75% a month versus a 15-year mortgage with an interest rate of 0.7% a month. Both mortgage are for $100,000 and have monthly payments. 1) What is the monthly payment committed by the 30-year mortgage? And the total payment? 2) What is the monthly payment committed by...
loan officer states, "Thousands of dollars can be saved by switching to a 15-year mortgage from...
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 an interest of 0.75% a month versus a 15-year mortgage with an interest rate of 0.7% a month. Both mortgage are for $100,000 and have monthly payments. 1) What is the monthly payment committed by the 30-year mortgage? And the total payment? 2) What is the monthly payment committed by the...
13. Mortgage payments Mortgages, loans taken to purchase a property, involve regular payments at fixed intervals...
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...
You take out a $25,000 30 years mortgage with monthly payments and a rate of 3.5%,...
You take out a $25,000 30 years mortgage with monthly payments and a rate of 3.5%, monthly compounded. What is your monthly mortgage payment? You take out a $25,000 30 years mortgage with monthly payments and a rate of 3.5%, monthly compounded. What is the loan balance by the end of year 15? Calculate the future value at the end of year 4 of an investment fund earning 7% annual interest and funded with the following end-of-year deposits: $1,500 in...
A. Julio has taken out a 25-year mortgage for $82,000.       The interest rate is 8.5%...
A. Julio has taken out a 25-year mortgage for $82,000.       The interest rate is 8.5% and the down payment is 20%.       Calculate the monthly payment. Purchase Price $82,000.00 Interest Rate 8.5% Length of Loan in Years 25 Down Payment Percent 20% Down Payment Amount Financed Units Factor 8.0528 Monthly Payment B. Complete the amortization schedule for the first three months of Julio’s mortgage. Month Monthly Payment Interest Portion Principal Portion Loan Balance ––––– ––––– ––––– ––––– 1 2...