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You purchase a house that costs $500,000 with an 8% (APR), 30-year mortgage. You make a 20% down payment to avoid PMI insurance.

1. What is your monthly payment?

2. Amortize the first and second payments.

3. What percentage of the mortgage is paid off after 5 years?

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Hubert Koch
Hubert KochLv2
28 Sep 2019
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Related questions

You have just sold your house for 1,100,000 in cash. Your mortgage was originally a 30-year mortgage with monthly payments and an initial balance of 800,000. The mortgage is currently exactly 18.5 years old, and you have just made a payment. If the interest rate on the mortgage is 7.75% APR, how much cash will you have from the sale once you pay off the mortgage?

You are given with the following information of two proposals of financing programs for

your home loan. Suppose the new house costs you $540,000 (sales taxes and others are

included). One program is asking you to deposit a 20% down payment on the $540,000 and it

provides you with 3.24% interest rate for 15-year monthly payments of the remaining

balance, the other program is a 100% financing program which gives you a 2.2% for the first

5 year plus the PMI (property mortgage insurance) as $300 per month with a balloon

payment as $530,000.(That is, a lump-sum payment at the end of 5th year). The mortgage rate

increases to 5.85% afterward for a 30-year mortgage if the balloon payment is not paid and

refinancing is applied (That is, the extended program is for 30 years not for the 25 years

leftover). Let there be no prepayment penalty. That is, you may pay off the loan should you

have some extra cash later on. The brokerage fees and commissions are already taken into

account in all the numbers given. Answer the following questions.

a) What is the monthly payment for each program in the first 5 years? Which one is more

favorable to you if your monthly income is $7,000 before tax? (Notice that most lenders will

require the borrower to have ratio between mortgage payment and monthly income no

greater than 33%).

Buying a House

2) After you've been working five years, you decide to buy a house. As a rule of thumb, your house payments should not exceed 25% of your gross pay. Based on your annual salary during your sixth year on the job $42, 543, what is the maximum amount you could afford in the house payments per year?

3) Calculate the maximum house payment you could afford per month?

4) Assume you will qualify for an 8%, 30-year conventional mortgage. How much could you borrow based on the maximum monthly payment you can afford? (8% compounded monthly)

5) Lenders often expect that you have 20% of the value of the house as a down payment. Assume that you will be able to make a 20% down payment. What is a total cost of the house you could afford? The total cost is equal to the mortgage plus the down payment. (HINT: Use algebra. You want to calculate 20% of the value of the house, not 20% of the amount you are financing.)

6)What is the amount you would pay for for this house over the 30-year mortgage with monthly payments? Don't forget to include the down paument. (In the words, how much total cash will you be paying for this house - not taking into account the time value of money?)

7) How large would your monthly payments be if you could qualify for a 2-year mortgage at 8% compounded monthly (for the same amount you could borrow based on your calculations in question 4)?

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