Since the 2008 subprime mortgage crisis occurred, homebuyers have become more aware of their rights and...

Since the 2008 subprime mortgage crisis occurred, homebuyers have become more aware of their rights and responsibilities of understanding the various terms and conditions offered by lenders. First, find a dream house you might be interested in purchasing. It could be anywhere in United States, even a Hollywood mansion. Provide the city and state where the home is located and also the current value of the home. You can even include a picture, but make sure you credit the actual source. Please note, you don’t have sufficient cash to purchase this property out right and will need to finance.

Next, fill out the Mortgage Payment Spreadsheet with the following information (but don’t share it):

price of the property-$200,000

down payment – should be 20%

interest rate – use the current 30-year Fixed Rate Mortgage from FRED

PMT frequency - monthly

In your initial post, address the following:

What was the overall amount of interest paid over the term of the loan?

Change multiple variables (such as interest rate, down payment) and describe the impact of each.

In your analysis, what variable played the biggest role on the total amount paid on the loan amount over the life of the mortgage? Be creative, you can even prepay throughout the life of the mortgage.

After doing this exercise, would you be changing anything in your current mortgage or maybe future mortgage?

Expert Solution

Loan Amount $160,000 ( after considering 20% down payment)

Loan Tenure = 30 years

FRED Mortgage Rate for 30 Years = 4.31% ( as on 14th March 2019)

1. EMI = $792.73

Total Interest Payment = $125,382.80

2.

a.If tenure is changed from 30 years to 20 years then the total interest payout will be $79016 ; EMI will be $ 995.90

b.If tenure is changed from 30 years to 10 years then the total interest payout will be $37232 ; EMI will be $1643.60

c. If rate of interest decreases by 1% then the total interest payout for 30 years will be $ 92579.6 ; EMI will be $701.61

d. If rate of interest increases by 1% then the total interest payout for 30 years will be $ 160212.8 ; EMI will be $889.48

3. Basis the above, a short repayment tenure has a direct favourable impact on the interest outflows. Shorter tenure calls for higher EMI payouts monthly.

4. In the mortgage, i will prefer changing the tenure of the mortgage depending upon the ability to service the EMIs.

ekkarill92 answered 4 months ago

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