Question

In: Finance

James King bought a house three years ago that cost $750,000. James put up 20% deposit...

James King bought a house three years ago that cost $750,000. James put up 20% deposit and borrowed the rest from FC Bank at a rate of 7.2% per annum, compounded monthly, for 10 years.

Three months ago, FC Bank notified James that after the last monthly payment for the third year, the interest rate on his loan will increase to 9.6% per annum, compounded monthly, in line with market rates. Also, from the fourth year of his loan James can either increase the monthly repayment (so as to pay off the loan by the originally agreed date), or he can keep paying the same original monthly repayment and extend the term of the loan.

  1. Calculate the new monthly repayment if James pays off the loan by the originally agreed date.
  2. Calculate the extra period added to the term of the loan, if James keeps on paying the original monthly repayment.

Solutions

Expert Solution

Use a spreadsheet for the ease in computations. Enter values and formulas in the spreadsheet as shown in the image below.

The obtained result is provided below.

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

James King bought a house three years ago that cost $750,000. James put up 20% deposit...
James King bought a house three years ago that cost $750,000. James put up 20% deposit and borrowed the rest from FC Bank at a rate of 7.2% per annum, compounded monthly, for 10 years. Three months ago, FC Bank notified James that after the last monthly payment for the third year, the interest rate on his loan will increase to 9.6% per annum, compounded monthly, in line with market rates. Also, from the fourth year of his loan James...
A family purchased a house 10 years ago for $90, 000. The family put a 20%...
A family purchased a house 10 years ago for $90, 000. The family put a 20% down payment on the house, and signed a 30-year mortgage at 9% on the unpaid balance. The net market value of the house (amount after subtracting all fees involved with selling the house) is now $140, 000, and the family wishes to sell the house. How much equity does the family have in the house now after making 120 monthly payments?
Bubba bought his house 20 years ago, he is borrowed $200,000 with a 30-year mortgage with...
Bubba bought his house 20 years ago, he is borrowed $200,000 with a 30-year mortgage with a 5.0% APR. His mortgage broker has offered him a 10-year mortgage with a 4% APR with 3 points closing costs. What is Charlie's old monthly payment? What is the balance on Bubba's mortgage? What is Bubba's new monthly payment? What are Bubba's present value savings after paying the points if he plans to live in the house until the mortgage is paid off?
Three years ago, you bought a house. You took out a $350,000.00 mortgage at 4.75% for...
Three years ago, you bought a house. You took out a $350,000.00 mortgage at 4.75% for 30 years. Now that interest rates have fallen (beginning of year 4 of your current mortgage), you are considering refinancing your existing loan with a new 30 year loan. Your new loan must pay off the remaining balance of your old loan plus pay for all of the fees, associated with the new loan. In addition to all of the standard fees, you choose...
An investor bought a property 3 years ago for Sh, 500,000 of which 20% was cost...
An investor bought a property 3 years ago for Sh, 500,000 of which 20% was cost of land. The building is depreciated on a straight-line basis over 20 years. The property can be sold today for Sh. 800,000. The loan outstanding today is Sh. 280,000. The capital gain tax on price appreciation is 20% and 25% on depreciation recapture.Calculate the after tax cash flow from the sale of the property.
You bought your house five years ago and you believe you will be in the house...
You bought your house five years ago and you believe you will be in the house only about five more years before it gets too small for your family. Your original home value when you bought it was $500,000, you paid 10 percent down, and you financed closing costs equal to 3 percent of the mortgage amount. The mortgage was a 25-year fixed- rate mortgage with a 5 percent annual interest rate. Rates on 30-year mortgages are now at 3...
Jingfei bought a house 6 years ago for $200,000. Her down payment on the house was...
Jingfei bought a house 6 years ago for $200,000. Her down payment on the house was the minimum required 10% at that time she financed the remainder with a 30-year fixed rate mortgage. The annual interest rate was 8% and she was required to make monthly payments, and she has just made her 72th payment. A new bank has offered to refinance the remaining balance on Jingfei's loan and she will have to pay $1,320 per month for the next...
      Ms. Cressida bought a car for $48,000 exactly three years ago. After making an up-front...
      Ms. Cressida bought a car for $48,000 exactly three years ago. After making an up-front equity payment of $5,000, she borrowed the rest of the car value from her bank in the form of a five-year loan. She negotiated a loan rate of 2.5% APR with semi-annual compounding. She makes loan payments of an equal dollar amount every two weeks (i.e., biweekly), and her first loan payment was due two weeks after she signed the loan contract.                                                    (10...
Dr. Jun bought a $330000 house 7 years ago. The house is now worth $627000. Originally,...
Dr. Jun bought a $330000 house 7 years ago. The house is now worth $627000. Originally, the house was financed by paying 35% down with the rest financed through a 20-year mortgage at 6% interest. After making 84 monthly house payments, he is now in need of cash, and would like to refinance the house. The finance company is willing to loan 85% of the current value of the house amortized over 25 years at 4% interest. How much cash...
Shirley Trembley bought a house for $187,600. She put 20% down and obtained a mortgage loan...
Shirley Trembley bought a house for $187,600. She put 20% down and obtained a mortgage loan for the balance at 6 3/8% for 30 years. a. Find the monthly payment. b. Find the total interest paid Please show your work
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT