Question

L You will only receive credit on the shels labell your You th or complete photocopy). You may Mathematics Map the origin them which you w ch You otherwiecie 3 Q008 Negative Amortization Negative amortization occurs when the principal balance on a loan (usually a morte) increases because the borrower's payments don't cover the total amount of interest that has accrued. Thomas decides to purchase a house that costs $294,000. The bank requires a 10% downpayment and will provide a 15 year mortgage at a annual interest rate of 8% The bank tells Thomas that his monthly mortgage payments will be $2,529.27 Thomas decides that that is too much, so the bank offers Thomas a lesser monthly payment amount in the form of a negative amortization payment. "pick your payment", Thomas can pay as much or a little as Thomas wants for the first year of the mortgage. Thomas decides to pay only $1,640.88. a month. Calculate the mortgage loan amount, the monthly payment will be is $1.640.88. Use four 4 decimal places THEN round dollar values to the nearest penny 5 points b. Create an negative amortization schedule for the first 4 months of Thomas's mortgage. 10 points

Answer 1

Cost of house = $ 294000

Down payment = 10% of cost of house which will be 294000*10/100 = 29400

Mortgage terms = 15 Years

Annual rate of Interest = 8%

(a.) Calculation of Mortgage Loan Amount -

Mortgage Loan Amount = Cost of House - Downpayment

= 294000 -29400

= $ 264600

(b.) Creation of an negative amortization schedule for the first four months of Thomas mortgage -

Monthly payment = 1640.88

Month	Opening	Installment	Interest	Principal	Closing
1	264600.0000	1640.8800	1764.0000	-123.1200	264723.1200
2	264723.1200	1640.8800	1764.8208	-123.9408	264847.0608
3	264847.0608	1640.8800	1765.6471	-124.7671	264971.8279
4	264971.8279	1640.8800	1766.4789	-125.5989	265097.4267

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