4 An investor obtained a fully amortizing mortgage five years ago for $96,200 at 11 percent for 30 years. Mortgage rates havedropped, so that a fully amortizing 25-year loan can be obtained at 10 percent. There is no prepayment penalty on the mortgagebalance of the original loan, but 3 points will be charged on the new loan and other closing costs will be $2,000. All payments aremonthly. Assume that the investor borrows only an amount equal to the outstanding balance of the loan.Required:a. Should the borrower refinance if he plans to own the property for the remaining loan term?b. Should the borrower refinance if he planned to own the property for only five more years?Complete this question by entering your answers in the tabs below.Required ARequired BShould the borrower refinance if he plans to own the property for the remaining loan term?Should the borrower refinance?Required ARequired B>

N= 30*12=360 I = 11/12/100=0.00916667 Present value (P)= $96200

Answered: An investor obtained a fully amortizing…

Personal Finance

13th Edition

ISBN:9781337669214

Author:GARMAN

Publisher:GARMAN

Chapter9: Obtaining Affordable Housing

Section: Chapter Questions

Problem 4DTM

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Cost of Bank Loan Mary Jones recently obtained an equipment loan from a local bank. The loan is for 15,000 with a nominal interest rate of 11%. However, this is an installment loan, so the bank also charges add-on interest. Mary must make monthly payments on the loan, and the loan is to be repaid in 1 year. What is the effective annual rate on the loan (assuming a 365-day year)?
Using the information provided, what transaction represents the best application of the present value of an annuity due of $1? A. Falcon Products leases an office building for 8 years with annual lease payments of $100,000 to be made at the beginning of each year. B. Compass, Inc., signs a note of $32,000, which requires the company to pay back the principal plus interest in four years. C. Bahwat Company plans to deposit a lump sum of $100.000 for the construction of a solar farm In 4 years. D. NYC Industries leases a car for 4 yearly annual lease payments of $12,000, where payments are made at the end of each year.
An investor obtained a fully amortizing mortgage five years ago for $95,000 at 11 percent for 30 years. Mortgage rates have dropped, so that a fully amortizing 25-year loan can be obtained at 9.8 percent. There is no prepayment penalty on the mortgage balance of the original loan, but three points will be charged on the new loan and other closing costs will be $2,000. All payments are monthly. Assume that the investor borrows only an amount equal to the outstanding balance of the loan.. What is the loan balance at the end of year 5? a. $87,691.09 b. $101,537.05 c. $92,306.41 d. $92,000.00
An investor obtained a fully amortizing mortgage 5 years ago for $95,000 at 11 percent for 30 years. Mortgage rates have dropped so that a fully amortizing 25-year loan can be obtained at 10 percent. There is no prepayment penalty on the mortgage balance of the original loan, but three points will be charged on the new loan and other closing costs will be $2,000. All payments are monthly.a. Should the borrower refinance if he plans to own the property for the remaining loan term? Assume that the investor borrows only an amount equal to the outstanding balance of the loan.b. Would your answer to part (a) change if he planned to own the property for only five more years?
Consider the following. Two mortgages are available for $500,000.00. Both are paid monthly, compounded quarterly have terms of 5 years and are amortized over 25 years. One has an interest rate of 3% however prohibits any prepayment, the other has an interest rate of 3.1% and allows for prepayment of 10% of the balance per year. If the borrower expects to make a lump sum payment at the end of each year of $400.00 which mortgage costs the least interest by the end of the term?
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Your friend has just purchased a house and has incurred a $150,000, 4.5% mortgage payable at $760.03 per month. After making the first monthly payment, he receives a statement from the bank indicating only $197.53 had been applied to reducing the principal amount of the loan. Your friend then calculates that at the rate of $197.53 per month, it will take 63 years to pay off the $150,000 mortgage. Discuss and explain whether your friend’s analysis is correct or not.
The Switzers are nearing the end of the first five-year term of a $95,000 mortgage loan with a 25-year amortization. The interest rate has been 6.5% compounded semiannually for the initial term. How much will their monthly payments increase if the interest rate upon renewal is 7.5% compounded semiannually and the original amortization period is continued? (Do not round the intermediate calculations. Round your answer to two decimal places.)
A 30-year fully amortizing mortgage loan was made 10 years ago for $90,000 at 6 percent interest. The borrower would like to prepay the mortgage balance by $13,000. Required: a. Assuming he can reduce his monthly mortgage payments, what is the new mortgage payment? b. Assuming the loan maturity is shortened and using the original monthly payments, what is the new loan maturity?

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