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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?

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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 8 months ago
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