Question

1. Assume that you have a 30 year fully-amortized fixed rate mortgage for your home. Your loan amount is $300,000 with a 3% annual interest rate. After 28 years, you would like to sell the property. What is your loan balance at the end of 28 years?

2. Assume that you have a 30 year fully-amortized fixed rate mortgage for your home. Your loan amount is $300,000 with a 3% annual interest rate and your balloon payment is $50,000. What is your loan balance after 12 years?

3. Assume that you have a 30 year fully-amortized fixed rate mortgage for your home. Your loan amount is $300,000 with a 3% annual interest rate. When you originate your loan, you have to pay an up-front fee of 3% (or 3 points of your loan amount). What is your APR?

4. John takes a fully amortizing mortgage for $80,000 at 10 percent interest for 30 years, monthly payments. What will be his monthly payment?

5. Dave wants to buy a house. To do so, he must incur a mortgage. A local lender has determined that Dave can afford a monthly payment of $600, principal and interest. If the current interest rate on 30-year, fixed rate mortgages is 9.5 percent, what is the maximum amount of mortgage that Dave could qualify for?

6. Mike qualifies to borrow $120,000 on a mortgage at 9 percent for 30 years, monthly payments.
   1. What is his monthly payment?
   2. How much interest does Mike pay in the first month of the loan?
   3. How much interest does he pay in the first year of the mortgage?
   4. If he decides to repay the mortgage at the end of year 3, what is the outstanding balance at that time?
   5. How much total interest does he pay over this 3-year period?

7. You borrow $75,000 for 30 years with monthly amortization, and your payment is $590.03. What interest rate is being charged?

8. You want to purchase a house that has an asking price of $125,000. You can get a loan for 80 percent of the bank’s appraised value at 9.5 percent for 30 years, monthly payments. The appraiser values the house at 95 percent of the asking price.
   1. What will be your monthly payment if you take the loan?
   2. What would be the balance of the mortgage after 5 years?
9. You need a 30-year fixed-rate mortgage for $100,000. Bank A offers 6% interest with 1% closing costs. Bank B offers 5.75% interest with 2% closing costs and 1.5 discount point.
   1. What is your monthly payment from Bank A and Bank B?
   2. What is your loan balance after 7 years for each loan?
   3. What is the APR of these mortgages and which Bank will you choose? (Which Bank gives you a better offer?)

Please clearly show the five elements and other functions used (PV, FV, PMT, I/Y, N, Amort, etc).

Answer 1

1. the time pe od am D Loan amount of buying a house = $300,000 = L(say) It has a team of 30 years with 3% annual sale =8% (way) After 28 years, the amount paid = (1+at, where tis Hence, here we have r= 3/100 = 0.03. . Amount paid in a8 years = $300,000 + (1+0:0328 $ 686 378.3027 Also, the total loan amount that needs to be repayed repaid is $300,000 X 140.037.30 = $728178-7414. Hence, loan balance at the end of as years 2 sl 728178-7414 – 686378.3027) R$ 44800.43876, ALE 2 A 30-year fully amortized ban of $300,000 with a 3ye annual interest rate for a home is taken. Also, there is a balloon payment of $ op soy ooo Then the loan amount on which the interest will be calculated is $( 300,000 - 50.000) = $ 250,000 . Loan amount that needs to be repaired = $12500004 (4 0:03)30) = $ 606815.6178 Loan amount that will be paid in 12 years = $ ( 250,000 X (1+0.03)2) = $ 356440.2217. Hence loan balance after 12 years a 06815.6178 -356440.2217) = $ 250 375.3961. 3 A 30-year fully amortized loan of $300,000 with a 3% annual interest rate for a home is taken . . An up-fort fee of 3% is paid . Then the amount paid = $ 30 x 300,000 = $9,000. Then the amount of an with standing = $(300,000 + 9,000) = power to $309,000 Nors, annual payment m this loan with 3% interest ${309000 (1+0.03)}= $ 318270 ,

To calculate the APR 1- Annual Payment Loan . = $(318270 - 300000) = $18240 Annual payment i APR = 18270 300170 = 6:09 y. value of mortgage taken by John & $80,000 Rate is 10% for 30 years. Total value = $80,000 (+0.1) 30 = $ 1395952.182. · monthiny payment = $(1395952. 182 – 807000) / tre-360 = $ 3655.422728 . We take 360 here as there 360 months in 30 years.