You have saved $50,000 to use as a down payment for some property and to build a home. The home is in a prime building location that has trees and a stream running through the property. The clearing of the land and the building of the house will cost a total $650,000. a) How much money will you need to borrow through a mortgage for your home? b) The bank offers to finance your purchase with a 25-year amortized mortgage with a 5-year term at 4.125%. If you want to make monthly payments on this loan (end of each month), how much will each payment be? c) Prepare an amortization schedule for your first 3 mortgage payments d) At the end of the 5-year term, the mortgage terms allow you pay down an additional 10% of the original mortgage amount and the terms allow you to change the remaining amortization period. You have saved the additional money to pay down the amount of the loan (additional 10% of the original mortgage amount) and you want to shorten the remaining amortization by 5 years. The bank will fund your mortgage at 4.50% for a 5- year term. If you are to make monthly, what are your new monthly payments for the mortgage after the renegotiation? e) What would happen to your payment if monthly mortgage payments were made at the beginning of the month instead of the end? (Briefly explain - no calculation required)
You have saved $50,000 to use as a down payment for some property and to build a home. The home is in a prime building location that has trees and a stream running through the property. The clearing of the land and the building of the house will cost a total $650,000. a) How much money will you need to borrow through a mortgage for your home? b) The bank offers to finance your purchase with a 25-year amortized mortgage with a 5-year term at 4.125%. If you want to make monthly payments on this loan (end of each month), how much will each payment be? c) Prepare an amortization schedule for your first 3 mortgage payments d) At the end of the 5-year term, the mortgage terms allow you pay down an additional 10% of the original mortgage amount and the terms allow you to change the remaining amortization period. You have saved the additional money to pay down the amount of the loan (additional 10% of the original mortgage amount) and you want to shorten the remaining amortization by 5 years. The bank will fund your mortgage at 4.50% for a 5- year term. If you are to make monthly, what are your new monthly payments for the mortgage after the renegotiation? e) What would happen to your payment if monthly mortgage payments were made at the beginning of the month instead of the end? (Briefly explain - no calculation required)
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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Concept explainers
Mortgages
A mortgage is a formal agreement in which a bank or other financial institution lends cash at interest in return for assuming the title to the debtor's property, on the condition that the obligation is paid in full.
Mortgage
The term "mortgage" is a type of loan that a borrower takes to maintain his house or any form of assets and he agrees to return the amount in a particular period of time to the lender usually in a series of regular equally monthly, quarterly, or half-yearly payments.
Question
Transcribed Image Text:You have saved $50,000 to use as a down payment for some property and to build a home. The home is in a prime
building location that has trees and a stream running through the property. The clearing of the land and the building of
the house will cost a total $650,000.
a) How much money will you need to borrow through a mortgage for
your home?
b) The bank offers to finance your purchase with a 25-year amortized mortgage with a 5-year term at 4.125%. If
you want to make monthly payments on this loan (end of each month), how much will each payment be?
c) Prepare an amortization schedule for your first 3 mortgage payments
d) At the end of the 5-year term, the mortgage terms allow you pay down an additional 10% of the original
mortgage amount and the terms allow you to change the remaining amortization period. You have saved the
additional money to pay down the amount of the loan (additional 10% of the original mortgage amount) and
you want to shorten the remaining amortization by 5 years. The bank will fund your mortgage at 4.50% for a 5-
year term. If you are to make monthly, what are your new monthly payments for the mortgage after the
renegotiation?
e) What would happen to your payment if monthly mortgage payments were made at the beginning of the month
instead of the end? (Briefly explain - no calculation required)
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