A home has price $260,000. After a down payment of $40,000, the rest is financed over...

A home has price $260,000. After a down payment of $40,000, the rest is financed over 25 years at an annual interest rate of 6% compounded monthl y. a) Use the appropriate table in your book to find the monthly payment to the bank. (Do NOT use annuity formulas). b) Suppose that annual taxes are $3120 and homeowner’s insurance has an annual premium of $720. Lenders often collect these amounts in equal monthly installments along with the mortgage payment and pay the taxes and insurance when they are due during this year (this is called escrowing). If the annual premiums are split evenly over 12 months and added to the principal/interest payment in (a), find the total monthly amount that is then sent to the bank each month. c) How much interest is paid over the life of the mortgage? Remember that insurance and taxes are not included in this.

Textbook is Mathematics for Business 10th edition

Solutions

Expert Solution

a) Monthly installment = principle * i/c * (1 + i/c)^nc / (1 + i/c)^nc -1

= 220000 (0.06/12) (1+ 0.06/12)^25*12 / (1+ 0.06/12)^25*12 - 1

= 220000 * 0.005 * 4.4649698121 / 3.4649698121

= 1417.46

b) Taxes and insurance premiums are evenly split over 12 months, then banks monthly collection would be : 1417.46 + (3120 / 12) + (720 / 12) = 1737.46

c) Mortgage total interest during life = 1417.46 * 300 - 220000 = $205238

ekkarill92 answered 2 years ago

Next > < Previous

Related Solutions

Home: $180,000 with $40,000 down payment. Financed for 20 years at 6% APR. Create loan amortization...

Home: $180,000 with $40,000 down payment. Financed for 20 years at 6% APR. Create loan amortization schedule in excel for constant payment method. Rework with an extra $40 in principal Create a loan amortization schedule in excel for constant amortization method.

You bought a $225,000 house with a $40,000 down payment and financed the remaining $185,000 with...

You bought a $225,000 house with a $40,000 down payment and financed the remaining $185,000 with a 30-year mortgage (home loan). The interest rate on the loan is 5%. a) Find the monthly payment. b) After 12 years of paying on this mortgage, you decide to explore refinancing. With 18 years left to go, what is your remaining loan balance? c) If you do refinance the amount from part (b) with a new 15-year loan at 3% interest, how much...

You put 20% down on a home with a purchase price of $250,000. The down payment...

You put 20% down on a home with a purchase price of $250,000. The down payment is thus $50,000, leaving a balance owed of $200,000. A bank will loan you this remaining balance at 3.91% APR. You will make monthly end-of-the-period payments with a 30-year payment schedule. What is the monthly annuity payment under this schedule?

The price of a home is $240 000. The bank requires a 15% down payment. The...

The price of a home is $240 000. The bank requires a 15% down payment. The buyer is offered two mortgage options: 15-year fixed at 8.5% or 30-year fixed at 8.5%. Calculate the amount of interest paid for each option. How much does the buyer save in interest with the 15-year option? Use the following formula to determine the regular payment amount. Find the monthly payment for the 15-year option. $ nothing (Round to the nearest dollar as needed.) Find...

The price of a home is $120,000. The bank requires a 20% down payment and three...

The price of a home is $120,000. The bank requires a 20% down payment and three points at the time of closing. The cost of the home is financed with a 30-year fixed-rate mortgage at 7%. a. Find the required down payment. $ b. Find the amount of the mortgage. $ c. How much must be paid for the three points at closing? $ (Round to the nearest dollar as needed.) d. Find the monthly payment (excluding escrowed taxes and...

You purchase a $1,250,000 home by providing a down payment equal to 20% of the purchase price.

You purchase a $1,250,000 home by providing a down payment equal to 20% of the purchase price. You take out a loan for the remaining balance that requires equal end-of -month payments over the next 30 years with an EAR of 3.8%. How interest will be paid with the first two payments?

How much of the third mortgage payment will go to pay down the principle? Home Price:...

How much of the third mortgage payment will go to pay down the principle? Home Price: $339,000 USD 15% down payment of selling price 25 year term loan with a 3% annual interest rate

You financed the purchase of a $300,000 apartment with a down payment in cash of 20%...

You financed the purchase of a $300,000 apartment with a down payment in cash of 20% of the purchase price. The remaining 80% is financed with a mortgage with a 1% monthly interest rate over the next 20 years. The mortgage is repaid with equal monthly installments. Compute the monthly installments on the mortgage. (5 points) What is the outstanding principal balance of the mortgage after 5 years (i.e., after 60 installments)? (5 points) Ten years later (after 120 installments),...

An industrial firm can buy a machine for $ 40,000. A down payment of $ 4,000...

An industrial firm can buy a machine for $ 40,000. A down payment of $ 4,000 is required and the balance can be paid in equal 5-year terms at 7% interest on the unpaid balance. As an alternative, the machine can be purchased for $ 36,000 in cash. If the firm's MARR is 10%, determining the applicant for alternatives must be accepted using the annual equivalency method ** I need the graph of the situation

Create an Amortization Schedule for a home that cost $259,000 with 20% down for a down-payment....

Create an Amortization Schedule for a home that cost $259,000 with 20% down for a down-payment. Do not use an online amortization schedule. Note the textbook amortization schedule is using an annual payment. Please complete a schedule for both 180 months (15 years) and 360 months (30 years). The interest rate for the year is 2.75% according to Bankrate for the area the home is in. Remember to divide your interest by 12 to get a monthly rate. How much...

Subjects