1. A borrower has secured a 30 year, $110,000 loan at 8%. Fifteen years later, the borrower...

1. A borrower has secured a 30 year, $110,000 loan at 8%. Fifteen years later, the borrower has the opportunity to refinance with a fifteen year mortgage at 7%. However, the up-front fees, which will be paid in cash, are $3,000.

What is the monthly payment on the initial loan?
What is the loan balance and the new monthly payment at the time of refinancing?
What is the return on investment if the borrower expects to remain in the home for the next fifteen years after refinancing?
Suppose you can earn a risk-free return of 3% on your $3,000 at the time of refinancing. Would the refinancing be a sensible choice?

Does anyone know how to solve these four problems with the details?

Expert Solution

jeff jeffy answered 2 years ago

7. A borrower has secured a 30 year, $100,000 loan at 8%. Fifteen years later, the...

7. A borrower has secured a 30 year, $100,000 loan at 8%. Fifteen years later, the borrower has the opportunity to refinance with a fifteen year mortgage at 7%. However, the up-front fees, which will be paid in cash, are $2,000. What is the monthly payment on the initial loan? What is the loan balance at the time of refinancing? What is the return on investment if the borrower expects to remain in the home for the next fifteen years...

A borrower has secured a 30 year, $320,000 loan at 7%. Ten years later, the borrower...

A borrower has secured a 30 year, $320,000 loan at 7%. Ten years later, the borrower has the opportunity to refinance with a 20 year mortgage at 6.2%. However, there is an upfront fee of $2500, which will be pain in cash. what is the return on investment (refinance) if the borrower expects to remain in the home for the next 5 years?

A borrower has secured a 25-year, $340,000 loan at 12% with monthly payments. Ten years later,...

A borrower has secured a 25-year, $340,000 loan at 12% with monthly payments. Ten years later, the borrower has an opportunity to refinance with a 15-year mortgage at 10%. However, the up-front fees which will be paid in cash, are equal to $6,400. What is the return on investment (refinancing) if the borrower expects to remain in the home for the next 15 years?

A borrower has a 30-year mortgage loan for $200,000 with an interest rate of 6% and...

A borrower has a 30-year mortgage loan for $200,000 with an interest rate of 6% and monthly payments. If she wants to pay off the loan after 8 years, what would be the outstanding balance on the loan? (D) $84,886 $91,246 $146,667 $175,545 Not enough information Please explain me the step on financial calculator. The answer is D

3. A borrower has a 30-year mortgage loan for $200,000 with an interest rate of 5%...

3. A borrower has a 30-year mortgage loan for $200,000 with an interest rate of 5% and monthly payments. If she wants to pay off the loan after 8 years, what would be the outstanding balance on the loan? (A) $84,886 (B) $91,246 (C) $171,706 (D) $175,545

. A borrower takes out a 30 - year adjustable rate mortgage loan for $200,000 with...

. A borrower takes out a 30 - year adjustable rate mortgage loan for $200,000 with monthly payments. The first two years of the loan have a “teaser” rate of 4%, after that, the rate can reset with a 2% annual rate cap. On the reset date, the composite rate is 5%. What would the Year 3 monthly payment be? (A) $955 (B) $1,067 (C) $1,071 (D) $1,186 (E) Because of the rate cap, the payment would not change.

A borrower takes out a 30-year mortgage loan for $100,000 with an interest rate of 6%...

A borrower takes out a 30-year mortgage loan for $100,000 with an interest rate of 6% plus 4 points. Payments are to be made monthly. a. What is the effective cost of borrowing on the loan if the loan is carried for all 30 years? b. What is the effective cost of borrowing on the loan if the loan is repaid after 10 years?

A borrower takes out a 30-year mortgage loan for $250,000 with an interest rate of 5%...

A borrower takes out a 30-year mortgage loan for $250,000 with an interest rate of 5% and monthly payments. What portion of the first month’s payment would be applied to Interest?

A borrower takes out a 30-year mortgage loan for $250,000 with an interest rate of 6%...

A borrower takes out a 30-year mortgage loan for $250,000 with an interest rate of 6% and monthly payments. What portion of the first month's payment would be applied to interest? ($1250) Assume the question above was a negative amortization loan, what would be the balance after 3 years?

4. A borrower takes out a 30-year mortgage loan for $100,000 with an interest rate of...

4. A borrower takes out a 30-year mortgage loan for $100,000 with an interest rate of 6% plus 2 points. What is the effective annual interest rate on the loan if the loan is carried for all 30 years? (A) 6.0% (B) 6.2% (C) 6.4% (D) 6.6%

Question