Suppose that five years ago you took a fixed-rate mortgage on your home for $150,000 at 7.75% for 30 years, monthly payments. Today the mortgage rate on 25-year fixed-rate mortgages is 7.20% and you are considering refinancing. The existing loan does not have a prepayment penalty but lenders are charging 4.00% financing costs on new loans. Your opportunity investment rate is 8.5%. a. If you plan to hold the mortgage financing for the next 25 years (whether you refinance or not), what is the NPV of refinancing? Assume that you would refinance the payoff of the existing loan and the new loan amortization would be for 25 years. b. What is the NPV of refinancing if you refinance the payoff of the existing loan for 25 years but you plan to hold the financing for only eight more years?

Q: Suppose you take out a 30 year mortgage for $ 200000 at 8.5% interest. The monthly payments on this…

A: Here,

Q: You want to buy a $260,000 home. You plan to pay $26000 as a down payment, and take out a 30 year…

A: When a person does not have enough money to buy any assets, he would consider taking a loan. The…

Q: a) How much is the loan amount going to be? b) What will your monthly payments be? c) How much…

A: Loan payments can be paid off in periodic payments. To understand the periodic payments the loan…

Q: You want to buy a $191,000 home. You plan to pay 15% as a down payment, and take out a 30 year loan…

A: Cost of home = $191,000Down payment = 15%Loan terms = 30 yearsInterest rate = 7%

Q: You would like to purchase your dream home, which costs $1.5M, with a 20% down payment and a 30-year…

A: The Payback Period: The payback period measures the time it takes for an initial investment to be…

Q: The price of a home is $600,000. The bank requires a 20% down payment. The cost of the home is…

A: compound = monthly = 12 Price of home = $600,000 Down payment = 20% Time = t = 30 * 12 = 360…

Q: Suppose you take out a 25-year $100,000 mortgage with an APR of 6%. You make payments for 3 years…

A: As per our guidelines, we are supposed to answer only 3 sub-parts (if there are multiple sub-parts…

Q: You want to buy a $255,000 home. You plan to pay 5% as a down payment, and take out a 30 year loan…

A: Amount of home = $255,000 Down payment = 5%  The time duration of the loan = 30 years

Q: You want to buy a $260,000 home. You plan to pay 5% as a down payment, and take out a 30 year loan…

A: a) Loan Amount = Total price of house - Down payment  = 260,000 - (260,000 * 5%) = 260,000 - 13,000…

Q: Suppose you take out a 45-year $250,000 mortgage with an APR of 6%. You make payments for 3 years…

A: A loan is a financial arrangement in which one or more people, companies, or other entities lend…

Q: You are considering the purchase of a $140,000 home and making a 20% down payment. You can obtain a…

A: Data given: Purchase price of home=$140,000 Down payment=20% n=15 year r=6.50% Discount point=2%…

Q: Do you want to By A home for $330,000. You plan to pay 33,000 as a down payment and take out a 15…

A: Loan amount is the amount that is borrowed from a financial institution after paying a certain…

Q: You have located a warehouse property to purchase at a price of $320,000. You plan to make a 20%…

A: Puirchase price of warehouse is $320,000 Down payment is of $64,000 Term of loan is 10 years…

Q: Suppose you want to buy a $144,000 home. You found a bank that offers a 30-year loan at 3.3% APR.…

A:

Q: You need a 25-year, fixed-rate mortgage to buy a new home for $240,000. Your mortgage bank will lend…

A: The lum sump that has to be paid at the end of the mortgage period for settling the loan at given…

Q: You are considering a mortgage for 30 years with initial value $280, 000, and annual interest rate…

A: The objective of the question is to determine how long it will take for the lower monthly payments…

Q: You have a choice between a 30-year fixed rate loan at 6.5% and an adjustable rate mortgage (ARM)…

A: EMI or monthly or annual mortgage payments are the fixed amount paid by the borrower to the lender…

Q: Assume that you have a thirty-year mortgage for $200,000 that carries an interest rate of 9.00%. The…

A: Mortgage Period30 yearsMortgage amount $     2,00,000.00Interest rate9%Reduced interest…

Q: You are considering refinancing your home’s 30 year mortgage at a lower interest rate.  Your…

A: When the interest rate on loan drops, borrowers tend to refinance their loan becuase in such cases,…

Q: Suppose you take out a 45-year $125,000 mortgage with an APR of 6%. You make payments for 5 years…

A: Original loan = $125,000 APR = 6% New loan APR = 5.2%

Q: 12. You are ready to buy a house, and you have $20,000 for a down payment and closing costs. Closing…

A: As per the time value of money, a dollar is worth more today than the same dollar in the future.…

Q: Suppose you purchased a house 7 years ago and took out a mortgage for $400,000 with a 5.6% interest…

A: Here,

Q: You can save a significant amount of mortgage interest paid if you make one additional principal and…

A: The monthly payment is the payment that has to be paid every month until the loan is amortized which…

Q: You want to buy a $226,000 home. You plan to pay 5% as a down payment, and take out a 30-year loan…

A: Price = $226000 Down payment = 5% Interest rate = 6.55% Monthly interest rate (r) = 6.55%/12 =…

Q: Suppose you are buying your first condo for $190,000, and you will make a $10,000 down payment. You…

A: Monthly payments refer to the amount that is being in every month including the principal and…

Q: A borrower is purchasing a property for $1,800,000 and can choose between two possible loan…

A: The incremental cost of borrowing refers to the additional expenses incurred when obtaining…

Q: You borrow $2mn at an interest rate of 5% per year to purchase a real estate property for the cost…

A: Principal = $2 millioninterest rate = 5%Cost of real estate = $2.5 milliona) Value of Property =…

Q: Suppose you intend to purchase a house worth $239,900 with a 30-year fixed rate mortgage. You have a…

A: Solution: When an amount is borrowed, it can either be repaid as a lump sum payment or in…

Q: A borrower is making a choice between a mortgage with monthly payments or biweekly payments. The…

A: a) Calculate the monthly payment as shown below: Hence, the value of the monthly payment is…

Q: You have just purchased a new warehouse. To finance the purchase, you've arranged for a 30-year…

A: Mortgage period = 30 yearsPurchase price = $2,700,000Mortgage amount = 80% of purchase priceMonthly…

Q: You are looking at a one-year loan of $20,000. The interest rate is quoted as 10 percent plus two…

A: Loans refer to contracts between two parties where one borrows a sum from the other on the promise…

Q: Suppose you want to purchase a home for $525,000 with a 30-year mortgage at 4.64% interest. Suppose…

A: given, price = $525000 n = 30 years r = 4.64% m = 12 down payment =30%

Q: Suppose that 10 years ago you bought a home for $150,000, paying 10% as a down payment, and…

A: It is assumed that repayments are made on annual basis.The purchase amount of home is $150,000. 10%…

Q: Will they get the home loan? You have a gross annual income of $175,000 and have been pre-approved…

A: Back-End ratio shows proportion of monthly income used to pay off debt. Back End Ratio=Monthly Debt…

Q: you want to purchase a home for $475,000 with a 30-year mortgage at 5.84% interest. Suppose also…

A: Mortgage loans are paid by equal monthly installments and these monthly payment carry the payment of…

Q: need a 25-year, fixed-rate mortgage to buy a new home for $200,000. Your mortgage bank will lend you…

A: Balloon payment is a single large payment made at the end of the loan period to finish the loan on…

Q: A mortgage banking company has been evaluating the merits of a 50-year mortgage (in addition to…

A: Given information: Mortgage loan is $300,000 Interest rate is 6% compounded monthly Number of years…

Q: A borrower can obtain an 80% loan with an 8% interest rate and monthly payments. The loan is to be…

A: The incremental cost of borrowing is the cost needed to pay over and above the cost of using one…

Q: a. The bank offers a 30​-year mortgage with fixed monthly payments and an interest rate of 0.53% per…

A: Given information :- Loan amount = $620,000 Time period =  30 years or 360 months  Monthly interest…

Q: Suppose you want to buy a $143,000 home. You found a bank that offers a 30-year loan at 3.9% APR.…

A: Information Provided: House price = $143,000 Loan period = 30 years Interest rate = 3.90%

Q: You have just made an offer on a new home and are seeking a mortgage. You need to borrow $600,000.…

A: Mortgage: It is termed as a loan used for purchasing properties, homes, and other real estate…

Effective Interest Rate

The term interest rate can be defined as the amount that is charged by the lender as a percentage on the principal amount. Interest rate which is charged annually is known as annual percentage rate.