John wants to buy a property for $105,000 and wants an 80% loan for $84,000. A lender indicatesthat a fully amortizing loan can be obtained for 30 years at 8% interest: loan origination fee of$3,500, which will be deducted from the contract amount, will also be necessary for John to obtainthe loan.What is the effective interest rate for the borrower, assuming that the mortgage is paid off after 30years? Answer in % form and round to 2 decimal places. You may approximate the annual rate bymultiplying the monthly rate by 12.

The mortgage loans are secured loans and these loans are paid by the monthly payments that carry the…

Answered: John wants to buy a property for…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Similar questions

Phil Pittman is interested in a fixed-rate mortgage for $400,000. He is undecided whether to choose a 15- or 30-year mortgage. The current mortgage rate is 4.5% for the 15-year mortgage and 5% for the 30-year mortgage. (Round your answers to the nearest dollar. Use this table, if necessary.)
The Nicols are buying a house selling for $235,000. They pay a down payment of $35,000 from the sale of their current house. To obtain a 15-year mortgage at a 5% interest rate, the Nicols must pay 3.5 points at the time of closing. a) What is the amount of the mortgage? b) What is the cost of the 3.5 points?
If Bobby takes out a mortgage for 30 years at an interest rate of 4% and his monthly repayments are $835.48, what is the loan principal (that is, the balance of the loan at drawdown)? Give your answer to the nearest ten dollars. Do not include commas or the dollar sign in your answer.
The Mendez family is considering a mortgage loan of $350,000 at an annual interest rate of 6.55%. (a) How much greater is their mortgage payment if the term is 20 years rather than 30 years?(b) How much less is the amount of interest paid over the life of the 20-year loan than over the life of the 30-year loan?
Phil Pittman is interested in a fixed-rate mortgage for $200,000. He is undecided whether to choose a 15- or 30-year mortgage. The current mortgage rate is 8% for the 15-year mortgage and 8.5% for the 30-year mortgage. (Round your answers to the nearest dollar. Use this table, if necessary.) (a) What are the monthly principal and interest payments (in $) for each loan? 15-year mortgage $ 1,911.304 30-year mortgage $ 1,537.827 (b) What is the total amount of interest (in $) paid on each loan? 15-year mortgage $ 30-year mortgage $ (c) Overall, how much more interest (in $) is paid by choosing the 30-year mortgage?
A mortgage loan is made to Mr. Jones for $30,000 at 10 percent interest for 20 years. If Mr. Jones has a choice between either a fully amortizing CPM or a CAM, which one would result in his paying a greater amount of total interest over the life of the mortgage? Would one of these mortgages be likely to have a higher interest rate than the other? Explain your answer.
Paul and Paula are purchasing a home for a price of $500,000. To avoid paying mortgage insurance, they will make a down payment of 20% of the price or $100,000. They will finance the remaining $400,000 with a 30-year, monthly payment, amortized mortgage at a fixed 7.2% nominal interest rate, with the first payment due in one month. What will the size of their monthly payment be?
Phil Pittman is interested in a fixed-rate mortgage for $300,000. He is undecided whether to choose a 15- or 30-year mortgage. The current mortgage rate is 4.5% for the 15-year mortgage and 5% for the 30-year mortgage. (Round your answers to the nearest dollar. Use this table, if necessary.) (a) What are the monthly principal and interest payments (in $) for each loan? 15-year mortgage $________ 30-year mortgage $________ (b) What is the total amount of interest (in $) paid on each loan? 15-year mortgage$ _______ 30-year mortgage$ _______ (c) Overall, how much more interest (in $) is paid by choosing the 30-year mortgage? $
Jeff purchased a house costing $200,000. He put 20% down and borrowed the balance negotiating a 4.20% conventional fixed-rate mortgage loan with a maturity of 15 years Approximately, how long would it take Jeff to repay one-half of the original loan principal balance if payments are made as agreed?
am. 08.
9

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