Solutions to Questions - Chapter 4 Fixed Rate Mortgage Loans

“This gives banks, lenders and other borrowers the ability to satisfy their short term financial needs.”

Home ownership is the American dream! It is one of the most costly purchases an individual or family can make in their lifetime. Some people save until they have cash to purchase however, many people borrow money from a bank or lending institution; when a person borrows money to purchase a home the loan is called a mortgage. The lender is called the mortgagee and the borrower is called the mortgagor; banks have several different types of mortgages: fixed rate mortgage, adjustable rate mortgage, investment mortgage and much more. Borrowers have to undergo the lender underwriting process to show financial capability of repaying the mortgage (Makarov & Plantin, 2013). In this article I will use a fictitious person named “Julianna,” she is in the process of buying her first home at age 30; I will be her lender and will use mathematical procedures to find out what is her down payment, principle, installment payment, points (closing cost), mortgage maturity value and total interest paid.

Imagine that you have a fixed 30-year interest rate for your mortgage, and the economy has experienced unanticipated inflation. Examine who the winner and loser would be. Is it the borrower or the lender in the given scenario? Provide support for your response.

That's why it's a good idea to understand the driving forces behind your mortgage rate. It will help you understand when it's a good idea to lock in a rate, or at the very least, help you make sense of your investment.

1. that Manufactured Homes recognizes sales when payment is received or, in the case of credit sales, when a down payment (generally 10% of the sales price) is received and the company and the customer enter into an instalment contract.

Primarily, you must understand that lowering the rate of interest will make it cheaper for people to borrow as well as make it cheaper to pay back existing loans. As a result, firms may use this money that they have saved to spend on upgrading the

Interest is stated in terms of a percentage rate to be applied to the face value of the loan.

Adjustable-rate mortgages: in simple terms, an adjustable-rate mortgage is when the interest on a loan changes with the market. This sounds nice if the interest rate is

Mortgage rates, loan rates, and interest rates change due to the economy. If the economy is doing well, that usually means there is an increase in the federal reserve or money supply. With more money traveling through the US, citizens are better able to purchase a home or a loan. More money can often bring more demand, as people now have more money to spend. Therefore, when the economy is filled with these healthy and positive factors, rates rise. When an economy is prosperous, this could lead to inflation or a higher price of goods. With higher prices come the higher rates.

On a personal level, high interest rates can deter you from buying a house or a car because the cost of financing would be too

A mortgage payment calculator in Kitchener at Expert Mortgage calculates your monthly payment and shows you the corresponding amortization schedule. If you are purchasing a home, our payment calculator allows you to test down payment and amortization scenarios, and compare variable and fixed mortgage rates. Many prospective homeowners applying for a mortgage tend to have two concerns before they agree to sign: How much interest will I end up paying? and can I afford the monthly payments? Unless you're a robot or mathematical savant, chances are you won't be able to calculate these figures off the top of your head. Continue reading this page to find out about our mortgage payment calculator

The source that lead to inflation began in 2000, with the funding of subprime mortgages or mortgages for individuals who had too low of credit and no down payment, with private-label mortgage-backed securities (Duca). This was done because subprime mortgages are more risky, so these securities would absorb that risk (Duca). The result of this process was that more individuals bought homes (Duca). In competitive markets when more individuals qualified for a loan, the demand for housing

It is a mild and tolerable form of inflation. It occurs when prices are rising slowly

Interest rates have a major economic impact on the real estate market. Interest rates directly affect property sales. Residential property realizes the greatest affect as interest rates have a considerable influence on a homebuyer’s capability to purchase a new property. The customer is affected when there are significant increases or decreases in interest rates. Declining interest rates lower the costs of obtaining a mortgage; this in turn creates higher demand for homes, and pushes home prices up. Conversely, high interest rates increase the costs to obtain a mortgage; these increases lower the demand for homes, which creates a decline in home prices. (Stammers, 2016)

When dealing with interest rates and inflation the standard equation that is used is Fisher equation. What the fisher equation explains is that the real interest rate and expected inflation equals to the nominal interest rate (it = rt + Etπt+1) This means that a rise in expected inflation causes lenders to raise their nominal interest rates as there would be a decrease in the value of their loans due to purchasing power of repayments being lower and this causes the decline in investment as borrowing costs rise.