Assume a 30-year, $600,000, 6% mortgage with annual payments. 16. Assume the first payment beginning in...

Assume a 30-year, $600,000, 6% mortgage with annual payments.
16. Assume the first payment beginning in exactly one year, what is the annual payment?
17. What is the outstanding mortgage balance after you have made 10 payments?
18. If the loan calls for monthly payments, what is the monthly payment?

Assume you have a 6% 30-year mortgage for $100,000 with now 10 years to maturity (annual payments with exactly one year to the next payment). You are considering a refinance of the loan at 4% with a refinancing fee of $4,000. 19. What is the remaining loan balance?
20. What is the new payment, if you choose to refinance. Is refinancing with the new rate (4%) a good idea?

Solutions

Expert Solution

We can solve these problems using excel formulae

16: Annual payment using PMT formula in excel = $43,589.35

17:

Principal paid off in 10 payments using CUMPRINC formula

-100033.63

Balance remaining = Original loan- principal paid

= 600000-100033.63

= 499966.37

18: Monthly payments = $3,597.30

19: Principal paid off in 20 payments using CUMPRINC formula = -279178.61

Balance remaining = Original loan- principal paid

= 600000 -279178.61

= 320821.39

20 New payment will be computed using a rate of 4%, term = 10 years and Principal PV = 320821.39+4000 refinancing fees.

New payments = $40,047.54

WORKINGS

jeff jeffy answered 1 year ago

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