Which of the following statements is true about 15-year and 30-year fixed-payment mortgages? A. A 30-year mortgage will likely have an interest rate lower than that on a 15-year mortgage. B. Borrowers pay more total interest over the life of a 30-year mortgage than on a 15-year mortgage assuming the same interest rate on both mortgages. C. The remaining balance on a 30-year loan declines more quickly than on a 15-year mortgage with the same interest rate. D. Both A and B are true. E. Both B and C are true. F. Both A and C are true. G. All three (A, B and C) are true.

Which of the following statements is true about 15-year and 30-year fixed-payment mortgages? A. A 30-year mortgage will likely have an interest rate lower than that on a 15-year mortgage. B. Borrowers pay more total interest over the life of a 30-year mortgage than on a 15-year mortgage assuming the same interest rate on both mortgages. C. The remaining balance on a 30-year loan declines more quickly than on a 15-year mortgage with the same interest rate. D. Both A and B are true. E. Both B and C are true. F. Both A and C are true. G. All three (A, B and C) are true.

Personal Finance

13th Edition

ISBN:9781337669214

Author:GARMAN

Publisher:GARMAN

Chapter9: Obtaining Affordable Housing

Section: Chapter Questions

Problem 2LTAI

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Which of the following is NOT typically a benefit of taking a 15 year mortgage instead of a 30 year mortgage? Less total payments. Lower monthly payment Less total money paid back on the loan. Lower interest rate.
Which of the following statements regarding a 20-year (240-month) $225,000, fixed-rate mortgage is CORRECT? (Ignore taxes and transactions costs.) The outstanding balance declines at a slower rate in the later years of the loan's life. The remaining balance after three years will be $225,000 less one third of the interest paid during the first three years. Because it is a fixed-rate mortgage, the monthly loan payments (which include both interest and principal payments) are constant. Interest payments on the mortgage will increase steadily over time, but the total amount of each payment will remain constant. The proportion of the monthly payment that goes towards repayment of principal will be lower 10 years from now than it will be the first year.
Which of the following statements regarding a 30-year (360-month) $100,000 fixed-rate mortgage is CORRECT? (Ignore all taxes and transactions costs.) Because it is a fixed rate mortgage, the amount paid in interest per payment is constant. With an amortized loan, a bigger proportion of each month's payment goes toward interest in the later periods. The remaining balance after three years will be $100,000 less the total amount of principal paid during the first 36 months. The monthly payment on the mortgage will steadily decline over time.
Which of the following statements regarding a 30-year monthly payment amortized mortgage with a nominal interest rate of 10% is CORRECT? 1. Exactly 10% of the first monthly payment represents interest. 2. The total dollar amount of principal being paid off each month gets smaller as the loan approaches maturity. 3. A smaller proportion of the last monthly payment will be interest, and a larger proportion will be principal, than for the first monthly payment. 4. The monthly payments will decline over time. 5. The amount representing interest in the first payment would be higher if the nominal interest rate were 7% rather than 10%.
A mortgage borrower has an outstanding debt at interest rate of J12= 6% and 450 TL monthly payments for 69 months remaining today. Another bank is offering the same monthly payments but for 63 months only at a lower interest rate. For the refinancing, borrower has to pay 1200 TL expense today. Decide if the borrower should refinance the debt or not by showing the difference of discounted values of two alternatives.
A mortgage borrower has an outstanding debt at interest rate of J12= 13.08% and $1,034 monthly payments for 69 months remaining today. Another bank is offering the same monthly payments but for 63 months only at a lower interest rate. For the refinancing, borrower has to pay $1,800 expense today. Decide if the borrower should refinance the debt or not by showing the difference of discounted values of two alternatives.
Over the life of a fixed payment amortized loan, such as a conventional mortgage, the proportion of the payment that goes to repay principal A : increases each month. B : varies with economic conditions. C : decreases each month. D : stays constant over time.
A graduated payment mortgage (GPM) enables the borrower to have lower payments earlier in the mortgage and increased payments later on. The assumption is the borrower’s income will increase over time so that it will be easier for the borrower to meet all payments. Suppose you borrow $150,000 on a 30-year monthly mortgage. You obtain a GPM where monthly payments increase 6% per year through year 5 and then remain constant from year 5 through year 30. For annual interest rates of 2%, 3%, 4%, 5%, and 6%, use Solver to find the amount of each year’s monthly payment.
Mortgage lenders base the mortgage interest rate they offer you on your credit rating. This makes it financially critical to maintain a credit score of 740 or higher. How much more interest would you pay on a $195,000 home if you put 20% down and financed the balance with a 30-year mortgage at 6% compared to a 30-year mortgage at 3 1/2%? what is interest paid?
A mortgage borrower has an outstanding debt at interest rate of J12= 9,08% and 1.158 TL monthly payments for 70 months remaining today. Another bank is offering the same monthly payments but for 64 months only at a lower interest rate. For the refinancing, borrower has to pay 1.900 TL expense today. Decide if the borrower should refinance the debt or not by showing the difference of discounted values of two alternatives. (hint: you must use the same interest rate for discounting two options to be able to compare)
1. You have just obtained a commercial mortgage for $6.25M with a 5-year term, 25-year amortization period and 6.50% mortgage interest rate. (a) Construct an amortization table for the term of the loan assuming annual payments. What is the annual payment? What is the balance at maturity? (b) What is the e¤ective cost of borrowing if the borrower pays an origination fee of $30,000? (c) The borrower can repay the balance of the loan at any time prior to its maturity, but must pay a penalty of 5% of the outstanding balance. What is the cost of borrowing if the borrower pays an origination fee of $30,000 and pays off the remaining balance of the loan after making payments for 4 years?
FreddieMac reports that the average rate on a 30-year fixed rate mortgage is 3.92% as of January 2012. This is down from 4.76% in January 2011 and 5.03% in January 2010. If you have a $230,000, 5%, 30-year mortgage, how much interest will you save if you refinance your loan at 3.5% for 15 years?

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	A.	A 30-year mortgage will likely have an interest rate lower than that on a 15-year mortgage.
	B.	Borrowers pay more total interest over the life of a 30-year mortgage than on a 15-year mortgage assuming the same interest rate on both mortgages.
	C.	The remaining balance on a 30-year loan declines more quickly than on a 15-year mortgage with the same interest rate.
	D.	Both A and B are true.
	E.	Both B and C are true.
	F.	Both A and C are true.
	G.	All three (A, B and C) are true.