6. You are considering the purchase of a $250,000 house using a regular fixed rate mortgage...

6. You are considering the purchase of a $250,000 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 reasons you would consider using a 5/1 adjustable rate mortgage? Would it be beneficial in today’s current interest rate environment to consider using an ARM?

Solutions

Expert Solution

Outstanding loan amount after down payment=250000*(1-20%)=$200000

You should choose adjustable rate mortgage whenever you think that future interest rate will not go up rather it may go down. If you are bearish about interest rate then only you choose ARM.

jeff jeffy answered 3 months ago

Next > < Previous

Related Solutions

1. You are considering the purchase of a $250,000 house using a regular fixed rate mortgage...

1. You are considering the purchase of a $250,000 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 reasons you would consider using a 5/1 adjustable rate mortgage? Would it be beneficial in today’s current...

You plan to purchase a $250,000 house using a 15-year mortgage obtained from your bank. The...

You plan to purchase a $250,000 house using a 15-year mortgage obtained from your bank. The mortgage rate offered to you is 5.00 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?

Suppose that you are considering a conventional, fixed-rate 20-year mortgage loan for $250,000. The lender quotes...

Suppose that you are considering a conventional, fixed-rate 20-year mortgage loan for $250,000. The lender quotes an APR of 7%, compounded monthly; mortgage payments would be monthly, beginning one month after the closing on your home purchase. In the tenth year of your mortgage (months 109 through 120), what would be the total dollar amount of the interest paid? Do not round at intermediate steps in your calculation. Group of answer choices $15,199.56 $13,159.65 $12,112.53 $14,064.27

Suppose that you have decided to purchase a house for $400,000 using an adjustable-rate mortgage with...

Suppose that you have decided to purchase a house for $400,000 using an adjustable-rate mortgage with the terms provided below. Loan-to-value ratio: 90% Index rate: one-year Treasury yield (currently 3.00%) Margin: 250 basis points Amortization: 15 years with monthly payments and compounding Annual cap: 1.5 percentage points Lifetime cap: 5 percentage points Adjustment period: Annually Teaser Rate 2.50% What is the monthly payment during the first year of the loan? a. $2400.44,b. $2133.73,c. $3268.33, d. $2667.16, e. None of the...

You are considering the purchase of a home that would require a mortgage of $250,000 (i.e....

You are considering the purchase of a home that would require a mortgage of $250,000 (i.e. you are borrowing $250,000 from a bank to buy the house. You intend to pay the bank back through equal monthly instalments). Suppose you are interested in the arithmetic sum of all the instalments you pay. How much more in total will you pay if you select a 30-year mortgage with an APR of 5.65% rather than a 15-year mortgage at an APR 4.9%?...

a homeowner can obtain 250,000, 30 year fixed mortgage at a rate of 6% with zero...

a homeowner can obtain 250,000, 30 year fixed mortgage at a rate of 6% with zero points or at a rate of 5.5% with 2.25 points. IF you will keep the mortgage for 30 years, what is the net present value of paying the points (to the nearest dollar)

The typical term of a fixed rate mortgage for a house is 30 years. The mortgage...

The typical term of a fixed rate mortgage for a house is 30 years. The mortgage has a nominal annual interest rate of 4.75 percent compounded monthly, and payments are due at the end of each month. (a). What is the monthly payment ($/month) if the borrowed principal is $100,000? (b). Suppose that the mortgage has the same term but that instead of quoting an interest rate, you are simply quoted a monthly payment of $599.55 per month. Based on...

- What is the effective rate of a 4.25%, $250,000 30 year fixed rate mortgage with...

- What is the effective rate of a 4.25%, $250,000 30 year fixed rate mortgage with 1.5 discount points, if the mortgage is held for 10 years? - What is the effective rate of a 4.25%, $250,000 30 year fixed rate mortgage with 1.5 discount points, if the mortgage is held for 1 year? - You have two options for a 30 year fixed rate mortgage: $500,000 mortgage, 5% rate $500,000 mortgage, 4.50% rate, 2 discount points For how long...

Suppose you are buying a house and have taken out a mortgage for $250,000. The mortgage...

Suppose you are buying a house and have taken out a mortgage for $250,000. The mortgage is a 30 year fixed rate mortgage with an APR of 5.25%. What is your monthly mortgage payment? Construct a loan amortization table in Excel for mortgage loan in the previous problem. You should do the problem in Excel using monthly payments and you must submit the spreadsheet with formulas.

Subjects