Jim has an annual income $240,000. jim is looking to buy a house that is selling for $400,000 is a very desirable area, sought after by buyers. He applies for a loan at the bank and is approved for fully amortizing 30 years FRM at an annual rate of 3.40%, with monthly payments, compounded monthly. The bank will not lend more than 80% LTV. The payments, compounded monthly. The bank will not lend more than 80% LTV. The appraisal indicates the house is worth more than $375,000. Jim does not PMI. 1. What is the biggest mortgage Jim can get? 2.What will his monthly payment be? Jim decides to shop around more and finds option #2 - a bank willing to give him a 90% LTV mortgage based upon the $375,000 appraised value at an interest rate of 3.65%. 3. What is the additional amount he can borrow? 4. over the life of the loan, what are the total payments he will make, including the down payment, for option #2? 5.What is the total cost of the incremental amount borrowed for option #2? 6. What is the effective interest rate for the additional amount borrowed under option #2?
Jim has an annual income $240,000. jim is looking to buy a house that is selling for $400,000 is a very desirable area, sought after by buyers. He applies for a loan at the bank and is approved for fully amortizing 30 years FRM at an annual rate of 3.40%, with monthly payments, compounded monthly. The bank will not lend more than 80% LTV. The payments, compounded monthly. The bank will not lend more than 80% LTV. The appraisal indicates the house is worth more than $375,000. Jim does not PMI. 1. What is the biggest mortgage Jim can get? 2.What will his monthly payment be? Jim decides to shop around more and finds option #2 - a bank willing to give him a 90% LTV mortgage based upon the $375,000 appraised value at an interest rate of 3.65%. 3. What is the additional amount he can borrow? 4. over the life of the loan, what are the total payments he will make, including the down payment, for option #2? 5.What is the total cost of the incremental amount borrowed for option #2? 6. What is the effective interest rate for the additional amount borrowed under option #2?
Related questions
1.) Suppose Oppenheimer Bank is offering a 30-year mortgage with an EAR of 6.800%. If you plan to borrow $150,000, what will be your monthly payment? (Note: Be careful not to round any intermediate steps less than six decimal places.) Your monthly payment will be $______
2.) You are looking to buy a car and you have been offered a loan with an APR of 6%, compounded monthly.
a. What is the true monthly rate of interest? 0.5%
b. What is the EAR?
3.) You have just sold your house for $1,000,000 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 18½ years old, and you have just made a payment. If the interest rate on the mortgage is 5.25% (APR), how much cash will you have from the sale once you pay off the mortgage? (Note: Be careful not to round any intermediate steps less than six decimal places.)
Cash that remains after payoff of mortgage is __________
4.) If the rate of inflation is 4.5%, what nominal interest rate is necessary for you to earn a 2.3% real interest rate on your investment? (Note: Be careful not to round any intermediate steps less than six decimal places.)
The nominal interest rate is ___%
5.) Use the table for the question(s) below.
Suppose the term structure of interest rates is shown below:
|
Term |
1 year |
2 years |
3 years |
5 years |
10 years |
20 years |
|
Rate (EAR%) |
5.00% |
4.80% |
4.60% |
4.50% |
4.25% |
4.15% |
What is the shape of the yield curve and what expectations are investors likely to have about future interest rates?
A. inverted; higher
B. inverted; lower
C. normal; higher
D. normal; lower
