A5 Mortgage Points Problem

# A5 Mortgage Points Problem - according to the above table(b...

This preview shows page 1. Sign up to view the full content.

A5 Mortgage Points Problem Points Table Provident Funding [per \$100,000 borrowed 10 year loan as of 9-7-2010 Rate Pts/Credit % Pts/Credit \$ 3.250 % 2.625 % \$2,625.00 3.375 % 1.625 % \$1,625.00 3.500 % 0.625 % \$625.00 3.580 % 0.00 % \$0.00 3.625 % -0.375 % (\$375.00) 3.750 % -1.500 % (\$1,500.00) 3.875 % -2.125 % (\$2,125.00) 4.000 % -2.500 % (\$2,500.00) 4.125 % -2.625 % (\$2,625.00) Question: Your mortgage balance is currently \$117,000 with 10 years remaining on the original 30 year contract at 6.75%. a) Determine the original principal? You have decided to refinance because the current market mortgage rate is now ______%. As part of the refinance package, you are offered the option to "buy down" the market % mortgage rate by paying points. One point equals 1% of the principle—for each % drop in interest rates
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: according to the above table. (b) Determine the new monthly payment associated with a refinance at the market rate and at the "buy down" of your rate to 3.375% (c) Buying down has a cost. Determine that cost to buy down. Determine how many months you have to remain in the house in order to break even on the monthly savings the buy down rate gives you making monthly payments? (d) Calculate your net gain (loss) by buying down the rate to 3.375% if you remain in the house the full 10 years? (e) What do "buyers" have to consider before accepting such a buy down option?...
View Full Document

## This note was uploaded on 02/13/2012 for the course MANEC 453 taught by Professor Jerrynelson during the Winter '10 term at BYU.

Ask a homework question - tutors are online