business HW

BUS-121 Spring 2017

Instructor: Frank Caperino

Comparing Mortgages Assignment

Name:

Due: April 17, 2017

Loan #1 Loan #2 Loan #3 Loan #4

Company

Phone / web site

Contact Person

Amount of Loan

Down Payment

Loan Fees

Application, credit report, appraisal fees

Loan origination fees (a.k.a. points)

Other fees and charges

Total Fees:

Fixed Rate Mortgage

Interest rate

Monthly payment

Discount points

Adjustable Rate Mortgage

Beginning interest rate

Beginning monthly payment

Discount points

Payment cap

Interest rate cap (per year)

Interest rate cap (for life of loan)

Negative amortization? (yes/no)

Rate index used

1) Compute the monthly payment, number of payments, and total amount paid and total interest paid over the life of the loan for the following fixed-rate mortgages:

Monthly Payment Number of Payments Total Amount Total Interest

a) $240,000, 4%, 30-year mortgage:

b) $240,000, 3½%, 20-year mortgage:

c) $240,000, 3%, 15-year mortgage:

2) You are considering refinancing your existing 5½% mortgage. Your current mortgage balance is $320,000 and you can get a 4% 30-year fixed-rate loan. How

much lower will your new payments be after the refinance of the mortgage and how long will it take you (in months) to pay back the closing costs of $4,918?

Current mortgage payment ($320,000 loan, 5½% rate, 30 years):

New monthly payment after refinance ($320,000 loan, 4% rate, 30 years):

Savings

each month: Time (in months) to pay back closing costs:

(Hint: Must use mortgage amortization table) (Hint: Must use mortgage amortization table)

(Hint: Current Mortgage Payment minus New Mortgage Payment) (Hint: Closing Costs divided by Savings each Month)