2. I decided to buy a house for $289,900. I have enough in savings to put 10% down on the house and pay all closing costs. If I take out a loan at 4.9% annual interest for 30 years, how much will my monthly mortgage payment be? a. If l increase my mortgage payment by $200, how much earlier will I pay off the house? How much interest will I save paying?
2. I decided to buy a house for $289,900. I have enough in savings to put 10% down on the house and pay all closing costs. If I take out a loan at 4.9% annual interest for 30 years, how much will my monthly mortgage payment be? a. If l increase my mortgage payment by $200, how much earlier will I pay off the house? How much interest will I save paying?
Chapter9: Obtaining Affordable Housing
Section: Chapter Questions
Problem 2DTM
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Transcribed Image Text:2. I decided to buy a house for $289,900. I have enough in savings to put 10% down on the
house and pay all closing costs. If I take out a loan at 4.9% annual interest for 30 years,
how much will my monthly mortgage payment be?
a. If I increase my mortgage payment by $200, how much earlier will I pay off the
house? How much interest will I save paying?
Often lenders will offer "points" to the borrower in order to reduce the interest rate of the loan
(often referred to as "paying down the loan"). One "point" is equal to 1% of the loan amount
that is paid, up front, to the lender as a fee in exchange for reducing the interest rate on the
loan by 0.25%.
b. If I have the option to "buy two points" reducing my interest rate, how much will
my monthly payment be? How much will I save over the life of the loan? Will it
be worth it to buy a point? If yes, explain why (this means tell me things like
how much money I might save, etc)? If not, explain why not (this means tell me
things like how much money it would cost me, etc)?
c. Suppose I plan on buying the home for the purpose of only living in it for 7 years
and then selling it so I can move to Hawaii for my retirement. If I plan on selling
the house in 7 years, is it a good idea to "buy the two points" at the time of
purchase? Taking all things into consideration, how much will I save or lose if I
purchase the two points and sell in 7 years?
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