Suppose that 10 years ago you bought a home for $160,000, paying 10% as a down payment, and financing the rest at 7% interest for 30 years. Your down payment was 16,000 and the existing mortage was 144,000. This year (10 years after you first took out the loan), you check your loan balance. Only part of your payments have been going to pay down the loan; the rest has been going towards interest. You see that you still have $123,570 left to pay on your loan. Your house is now valued at $200,000. 1. How much equity do you have in your home (equity is value minus remaining debt)? 2. Since interest rates have dropped, you consider refinancing your mortgage at a lower 6% rate. If you took out a new 30 year mortgage at 6% for your remaining loan balance, what would your new monthly payments be? 3. How much interest will you pay over the life of the new loan?
Suppose that 10 years ago you bought a home for $160,000, paying 10% as a down payment, and financing the rest at 7% interest for 30 years. Your down payment was 16,000 and the existing mortage was 144,000. This year (10 years after you first took out the loan), you check your loan balance. Only part of your payments have been going to pay down the loan; the rest has been going towards interest. You see that you still have $123,570 left to pay on your loan. Your house is now valued at $200,000. 1. How much equity do you have in your home (equity is value minus remaining debt)? 2. Since interest rates have dropped, you consider refinancing your mortgage at a lower 6% rate. If you took out a new 30 year mortgage at 6% for your remaining loan balance, what would your new monthly payments be? 3. How much interest will you pay over the life of the new loan?
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 3PB: Use the tables in Appendix B to answer the following questions. A. If you would like to accumulate...
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Suppose that 10 years ago you bought a home...
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Transcribed Image Text:Suppose that 10 years ago you bought a home for $160,000, paying 10% as a down payment, and
financing the rest at 7% interest for 30 years.
Your down payment was 16,000 and the existing mortage was 144,000.
This year (10 years after you first took out the loan), you check your loan balance. Only part of your
payments have been going to pay down the loan; the rest has been going towards interest. You see
that you still have $123,570 left to pay on your loan. Your house is now valued at $200,000.
1. How much equity do you have in your home (equity is value minus remaining debt)?
2. Since interest rates have dropped, you consider refinancing your mortgage at a lower 6%
rate. If you took out a new 30 year mortgage at 6% for your remaining loan balance, what
would your new monthly payments be?
3. How much interest will you pay over the life of the new loan?
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