Question

In: Economics

Suppose you take out a 30 year mortgage for $490000 at an annual interest rate of...

Suppose you take out a 30 year mortgage for $490000
at an annual interest rate of 4.0%.
You plan to sell the house after 10 years.

Question 1

How much do you owe on the house after five years?(No Response)

Question 2


How much do you owe on the house after ten years?(No Response)

After five years you have the opportunity to refinance what you owe
at an interest rate of 3.75% for 30 years.

Question 3

How much would you gain per month during the next 60 periods?(No Response)

Question 4

What is the maximum amount you would pay to refinance?

Solutions

Expert Solution

Loan amount = $ 490,000

Interest rate = 4% per annum

Time = 30 years

First of all calculate the monthly installment

After 5 years the amount that we owe is

After 5 year the amount you owe = $ 443,192.81

2. After 10 years you owe = $ 386,041.40

After 5 year the refinance rate is 3.75%

Calculating the monthly installment

3. Net gain per month = 2,339.33 - 2,052.50 = $ 286.84

4. Maximum amount you would pay to refinance

= $ 286.84 × 60

= $ 17,210.40

Please contact if having any query will be obliged to you for your generous support. Your help mean a lot to me, please help. Thank you


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