A.adjustable rate mortgages.
An adjustable rate mortgage will have a rate set below fixed rate mortgage and will vary with the changing market rates.
So this will be a better option to take advantage of expected falling interest rates.
Fixed rates will remain the same throughout the term of the loan.
Question 4 2 pts You anticipate that the interest rates in the economy are about to...
Question 10 10 pts Suppose that you purchased a house with a $140,000 mortgage (30-year fixed at 6% with a payment of $839.37) five years ago. The loan balance is currently $130,276 and you can refinance that balance at 5% with a new 30-year fixed rate mortgage. You anticipate being in the house for another five years, at which point the balance on your current mortgage would be $117,160. If you refinanced at the terms above, what would be the...
glancing A home mortgage with monthly payments for 30 years is available at 6% interest. The home you are buying costs $120,000, and you have saved $12.000 to meet the requirement for a 10% down payment. The lender charges "points" of 2% of the loan value as a loan origination and processing fee. This fee is added to the initial balance of the loan (a) What is your monthly payment? (b) If you keep the mortgage until it is paid...
Use your calculator to determine (1) the current mortgage payment (2) the total interest paid, (3) the payment after the first adjustment and (4) the maximum payment for each of the following $109,400, 30-year mortgages. Assume that the initial interest rate is 5.10 percent. a. Annually adjustable, 1 percent per year, 5 percent lifetime cap. Assume also that rates increase at least 1 percent per year until they reach the lifetime cap and rates never again drop below the lifetime...
Different types of mortgages: Suppose you are buying a house and have to borrow $200,000 by taking out one of the following mortgages. a) A fixed rate mortgage with 30-year-term and with mortgage rate of 7.5%. What would be the monthly payment? b) An adjustable-rate mortgage with 30-year-term and the initial mortgage rate of 7.5%. However after one year (12 months), the rate will increase to 8.5%. What will be the monthly payment after one year? c) An interest-only and...
1. Why are financial markets important to the health of the economy? 2. When interest rates rise, how might businesses and consumers change their economic behaviour? 3. How can a change in interest rates affect the profitability of financial institutions? 4. Is everybody worse off when interest rates rise? 5. What effect might a fall in stock prices have on business investment? 6. What effect might rise in stock prices have on consumers’ decisions to spend? 7. How does a...
4. A. What would be your monthly mortgage payment if you pay for a $250,000 home by making a 20% down payment and then take out a 3.74% thirty year fixed rate mortgage loan where interest is compounded monthly to cover the remaining balance. All work must be shown justifying the following answers. Mortgage payment = B. How much total interest would you have to pay over the entire life of the loan. Total interest paid = C. Suppose you inherit some money and...
The mortgage on your house is five years old. It required monthly payments of $1,450, had an original term of 30 years, and had an interest rate of 8% (APR). In the intervening five years, interest rates have fallen and so you have decided to refinance—that 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 6.125% (APR). a. What monthly repayments will be required with...
You are interested in buying a house that costs $300,000. You plan to make a 20% down payment and borrow 80% of the purchase price. You will issue a mortgage loan (yes, the borrower is the issuer of the mortgage loan) to the bank who is lending you the money. The term of the mortgage loan is 15 years. The interest rate is fixed at 5% per year. Let's assume yearly rather than monthly payments for this problem set. Keep...
Ten years ago you obtained a 30-year mortgage for $400,000 with a fixed interest rate of 3% APR compounded monthly. The mortgage is a standard fixed rate mortgage with equal monthly payments over the life of the loan. What are the monthly fixed mortgage payments on this mortgage (i.e., the minimum required monthly payments to pay down the mortgage in 30 years)? What is the remaining loan balance immediately after making the 120th monthly payment (i.e., 10 years after initially...
You are the financial manager of a wholesale company. One of your job responsibilities is to forecast what interest rates are going to look like in the foreseeable future. You are considering borrowing money and will forecast interest rates to determine if you should get a fixed or variable interest rate. You are being told the following:Inflation has been 2 % over each of the last 3 years and is not expected to change over the next year. Also the...