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A5 Answer Mortgage Points Problem
Points Table Provident Funding [per $100,000 borrowed 10 year loan as of
972010
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?
First find pmt for 117,000 @6.75% over 10 years.
Then set yrs to 30 and solve for PV
Pmt = 1343.44; that pmt will pay off a balance of $207,130.14 over 30 yrs = original
balance
You have decided to refinance because the current market mortgage rate is now
3.58%
. 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
according to the above table.
(b) Determine the new monthly payment associated with a refinance at the
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 Winter '10
 JerryNelson

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