Question

You are considering the purchase of a $600,000 house using a regular fixed rate mortgage loan...

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?

Homework Answers

Answer #1

1.
Monthly payment

30 year:
=600000*(1-20%)*5%/12*1/(1-1/(1+5%/12)^(12*30))=2576.74379045826

20 year:
=600000*(1-20%)*4.5%/12*1/(1-1/(1+4.5%/12)^(12*20))=3036.71700585586

15 year:
=600000*(1-20%)*4%/12*1/(1-1/(1+4%/12)^(12*15))=3550.50204292443

2.
Interest

30 year:
=600000*(1-20%)*5%/12*1/(1-1/(1+5%/12)^(12*30))*12*30-600000*(1-20%)=447627.764564975

20 year:
=600000*(1-20%)*4.5%/12*1/(1-1/(1+4.5%/12)^(12*20))*12*20-600000*(1-20%)=248812.081405406

15 year:
=600000*(1-20%)*4%/12*1/(1-1/(1+4%/12)^(12*15))*12*15-600000*(1-20%)=159090.367726397

3.
Pros: Beneficial in falling rate environment
Cons: Dangerous in rising rate environment and financial planning is difficult

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
purchase of your first home for $600,000. You have just purchased the house and have put...
purchase of your first home for $600,000. You have just purchased the house and have put a 20% down payment, and will borrow the remaining amount.  The 15-year fixed rate loan has an Annual Percentage Rate (APR) of 3.875%.   You will make monthly payments for the life of the loan. Question 12 related to your purchase of your first home for $600,000. You have just purchased the house and have put a 20% down payment, and will borrow the remaining amount.  The 15-year...
You plan to purchase a house for $290,000 using a 30-year mortgage obtained from your local...
You plan to purchase a house for $290,000 using a 30-year mortgage obtained from your local bank. You will make a down payment of 20 percent of the purchase price. You will not pay off the mortgage early. Assume the homeowner will remain in the house for the full term and ignore taxes in your analysis. Your bank offers you the following two options for payment. Option 1: Mortgage rate of 6.50 percent and zero points. Option 2: Mortgage rate...
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...
15. Mortgage payments Mortgages, loans taken to purchase a property, involve regular payments at fixed intervals...
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...
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 $300,000 to use as a down payment on the house, and want to take out a mortgage...
You plan to purchase a 430,000 house using 30-year mortgage obtained from your local bank. The...
You plan to purchase a 430,000 house using 30-year mortgage obtained from your local bank. The mortgage rate offered to you is 4.5%. You will make the down payment of 20 percent of the purchase price. Calculate your monthly payment on this mortgage? Also, show how much total interest will you be paying.
As you are applying for your mortgage loan, you and the bank agree that your total...
As you are applying for your mortgage loan, you and the bank agree that your total mortgage payment will not exceed $1,640 for the loan payments and your Escrow payments, which include your property taxes, and your insurance payments. Your annual property taxes are $3,600 and your annual insurance bill is $480. The bank will agree to approve your loan for 30 years at 3.45% if you agreed to make a down payment of 5% and have your payment equal...
You plan to purchase a $410,000 house using a 15-year mortgage obtained from your bank. The...
You plan to purchase a $410,000 house using a 15-year mortgage obtained from your bank. The mortgage rate offered to you is 4.75 percent. You will make a down payment of 20 percent of the purchase price. a. Calculate your monthly payments on this mortgage. b. Construct the amortization schedule for the mortgage. How much total interest is paid on this mortgage?
You are planning to purchase a house for $180,000. You will pay 20% down payment and...
You are planning to purchase a house for $180,000. You will pay 20% down payment and take a mortgage loan for the remaining 80%. You could get a 3/1 ARM amortized over 15 years at 3.9 % or a fixed 15 year FRM loan at 5.3%. The expected interest rate of the ARM from years 4 to 5 is 7.5%. You will live in the house for five years, and after that you expect to sell the house for $200,000...
I have a choice between two different fixed-rate mortgages when I purchase my $150,000 house. One...
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...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT