Question

A home is purchased for $153200. The homeowner pays $30640 down and finances the balance for 30 years at 7.5% compounded monthly.

a. Find the size of the payments rounded up to the next cent.

b. How much of the first payment is interest?

c. How much is still owed on the loan just after 110 payments.

d. What is the owner's equity after 110 payments?

e. How much is owed just before the 110 payment is actually made?

Just after 110 payments are made, the loan is refinanced at 6% compounded monthly.

a. If the duration of the original loan remains the same, find the size of the new payments rounded up to the next cent.

b. If money is worth 5.25% compounded monthly to the homeowner, what is the present value of the savings in interest at the time of refinancing?

c. If the homeowner continues with the original payments, find the number of full payments required to pay off the loan. full payments

d. Find the size of the smaller concluding payment at the end of the next month.

Answer 1

Part 1
Purchased Price	$ 153,200.00
Down Payment	$   30,640.00
Amount Borrowed = PV	$ 122,560.00
Rate = 7.5%/12	0.63%
Period = 30 x 12	360
a) Monthly Payments	$856.96
b) First payment Interest (122,560 x 0.63%)	$        766.00
c) Owed on the loan just after 110 payments.	$108,232.59
d) Assets – Liabilities = Owner’s Equity = 153,200 - 108,232.59	$   44,967.41
e) Owed on the loan just before 110 payments.	$108,411.98