A5 Mortgage Points Problem

A5 Mortgage Points Problem - according to the above table....

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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
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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?...
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