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Answer to Sample Mortgage problems F11

# Answer to Sample Mortgage problems F11 - (a \$4585.61(b...

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Mortgage essay problems 1) You are considering buying a \$120,000 Condo with finance terms in the table below: Provident Funding Data Rate Points % 5.000 % 2.000 % 5.125 % 1.500 % 5.250 % 1.125 % 5.375 % 0.750 % 5.500 % 0.375 % 5.625 % 0.000 % 5.750 % -0.250 % 5.875 % -0.500 % 6.000 % -0.750 % 6.125 % -1.000 % 6.250 % -1.250 % 6.375 % -1.375 % 6.500 % -1.500 % 6.625 % -1.625 % (Note: The values in the 1 st and 2 nd columns are for any loan amount) (1) Using the information above, you can choose between two financing options: a. make a 16.667% down payment and borrowing the remaining balance at market rates for 30 years (monthly pmts) or b. (2) make a 4.167% down, pay points and borrow the balance at 5.00 % (monthly pmts.) a) (4pts) Determine the monthly payment for each option. ( Show Work) (a) Pmt = \$575.66 (b) pmt = \$617.34 b) (6pts) Determine your potential wealth increase [net change in your equity] in present value terms as of the purchase date for each option assuming you sell the house after 4 years?
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Unformatted text preview: (a) \$4585.61 (b) \$3552.61 2) You are considering buying a \$100,000 Condo with the following finance options. You can make a 20% down payment and borrow the remaining 80% at 6.25% for 30 years (monthly pmts) or you can put 5% down and pay 3 points to borrow the 95% balance at 6 % (monthly pmts.) a) Determine the payments for each option. (a) Pmt = \$492.57 (b) pmt = \$569.57 b) Which option will have the lowest present value total cash outlay given you intend on staying in the condo only 4 years? (a) Pv outlay = \$20,000 + \$20,871.77 (b) Pv outlay = \$7850 + \$24, 134.51 c) Which option leaves you in the best increase in wealth when you sell the house after 4years? Option (a) because the-\$2850 for points will swamp the estra equity gained by the lower monthly pmts achieved by buying down the rate....
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