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The information presented here applies to questions 2 and 3.




Question 2;Note: The information presented here applies to questions 2 and 3. You are considering;borrowing the $185,000 you need to purchase your home using a 30-year mortgage with a;fixed annual rate of 5%. There are no points, but the loan comes with a prepayment penalty;equaling 3% of the remaining mortgage balance.;What is the penalty that must be paid if the balance of the loan is repaid after making;payments for three years?;Question 3;If the loan balance is repaid after making payments for three years, what is the effective cost;of borrowing?;Question 4;Your broker has just called to inform you that your offer on a lovely new studio apartment in;Gramercy Park has been accepted. You will finance 80% of the $560,000 purchase price with;a 3/1 ARM with an initial rate of 3.75%. What is the mortgage payment that you will make;each month for the first three years of the loan?;Question 5;Note: The information presented here applies to questions 5, 6, 7, 8 and 9. Two different;families, the Smith family and the Jones family, have taken out identical mortgages. Each;has borrowed $320,000 using a 5/1 ARM with an initial fully-indexed rate of 4.25% and;neither family paid any points at origination. The fully-indexed rate is determined by the;yield on the LIBOR index plus a margin of 250 basis points.;What was the yield on the LIBOR index at the time when each family purchased their house?;Question 6;If the rate determining payments for the first five years of the loan equals the fully-indexed;rate, what is the balance remaining at the first reset date?;Question 7;If, at the first reset date, the yield on the LIBOR index is 2.25%, what is the scheduled;monthly payment for the sixth year of the loan?;Question 8;The Smith family plans on selling their house at the end of four years. What is their effective;cost of borrowing?;Question 9;The Jones family plans on staying in their house for at least the next thirty years. If the yield;on the LIBOR index is 2.25% at the first reset date and does not change for the remaining life;of the loan, what is their effective cost of borrowing?;Question 10;You are planning to finance the acquisition of your new home with a biweekly payment;mortgage. The contract rate on the mortgage is 6% and you are borrowing $425,000. If you;make your payments as scheduled and hold the loan until the balance is repaid in full, how;many years did it take to repay your loan?;Question 11;Note: The information presented here applies the questions 11 and 12. You borrowed;$350,000 using a 30-year fixed-rate mortgage with a contract rate of 6%. The loan gives you;the choice between making the scheduled fully amortizing payment or a minimum payment;of $1500. After this initial two-year period, the existing balance of the loan is amortized over;the remaining 28 years of the loan's term. If you make the minimum payment each month for;the first two years, what is your new mortgage balance after making these payments?;Question 12;If you make the minimum payment each month for the first two years of the loan, what will;your fixed monthly payment be for the remaining term?


Paper#24320 | Written in 18-Jul-2015

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