wells fargo & home mortgage

Project Description:

product interest rate apr
conforming and fha loans
30-year fixed 5.125% 5.318%
30-year fixed fha 5.125% 5.897%
15-year fixed 4.250% 4.573%
5-year arm 3.750% 3.601%
5-year arm fha 3.500% 3.343%

(a) if apr = 4.573% and it is compounded daily, what would be your monthly payment for a 15 year mortgage on a $150,000 home? remember, you borrow the $150,000 from wells fargo today (at time t=0).

(b) if you make the 180 payments in the amount calculated in part (a), what is the total amount of interest (i.e. cost of capital) that you paid on this mortgage?

(c) when you are filling your federal income taxes after the first year of paying your mortgage (i.e. you made 12 end of month payments from january - december), how much will the mortgage save you in income taxes if you are in the 20% federal income tax bracket?

(d) after 5 years (i.e. immediately after making the 60th payment), how much do you still owe (in principal) on the home?

(e) after making the 60th payment you see that m&t bank is offering a refinancing option to refinance your mortgage for 15 years for 3.5% apr (compounded daily). to refinance you will need to pay $1,500 in fees and closing costs at closing (i.e. at time t=0 or at the beginning of the 61st month of your old mortgage). if you decide to refinance the principal portion owed on your loan at 3.5%apr (compounded daily), using the approximation method, approximately how many months will it take to recoup (i.e. break even) the closing costs with the amount you will save in mortgage interest ? (do not factor in income taxes)
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Price Type: Negotiable

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