Tom has come to you for advice regarding his home mortgage. He bought a house for $1.2 million. To finance the purchase of his home, he took out a mortgage for $865,000. The interest rate on the mortgage is 3.85% (APR) and it is amortized for 25 years. Tom tells you that the replacement cost of the house is $980,000.

1. Tom tells you he can pay $1,100 bi-weekly towards his mortgage. How long will it take Tom to pay off the mortgage?
2. Explain to Tom the amount of homeowner's insurance he should buy and give your reasons. Assume his insurance company has an 80% coinsurance factor.

Answer rating: 100% (QA)

Tom took out a 865000 mortgage at 385 APR amortized over 25 years He will pay 1100 biweekly towards ... View the full answer