Chapter 9, Problem 2OTN

We will now verify your results using an online Amortization Calculator. Return to www.bankrate.com (Links to an external site.), scroll down the home page and select Amortization Calculator (Links to an external site.) under the Mortgages heading. Enter the amount, time, and rate for the original loan to begin with and click CALCULATE. Your monthly payments will appear on the side. Click Show Amortization Schedule to see the month-to-month breakdown of your loan payments over the entire term of the loan.

In the Excel Payment Function file that follows, you are looking to see what your basic mortgage payment will be if you buy a home for $250,000.  It will be  a 30-year mortgage. The interest your bank will charge will be 7.5%.  In cell C5, use the PMT function to determine what your monthly payment will be.  Submit the spreadsheet in Canvas.

Before you are able to purchase a home you need to get pre-qualified and determine the maximum amount you can afford for the mortgage payment. The mortgage company that you visit uses the qualifying ratios 29/41. After speaking with the mortgage broker and answering several questions, the broker compiles this information regarding your income and expenses: You have a monthly income of $5,500. Your significant other that is living with your and will be on the loan earns $4,500 monthly. You have 2 car payments, one is $325 and the other is $280. Your significant other has a motorcycle payment of $450. You have a credit card payment of $25. Your significant other has a credit card payment of $180. The annual property tax in the area that you are considering to purchase the house has an average amount of $2800, while the average home insurance is $800 annually. Determine the anticipated monthly payment of the mortgage based on the given ratios. A) The Front-End (AKA: Housing) Ratio: ? B)…