2) You want to buy a house for $400,000 with 10% down payment. You take two...

 

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2) You want to buy a house for $400,000 with 10% down payment. You take two mortgages to over the $360,000 needed to buy the house. They are: • Loan 1: Loan amount $160,000, fully amortizing 30- year fixed rate mortgage for 4.2%. This loan has 2 points and 1% pre-payment penalty. • Loan 2: Loan amount $200,000, fully amortizing 15- year, 5-year ARM with reset every five years. Initial interest rate is 3.6%. Margin set at 2% over prime rate. Expected prime rates: 4% at end of year 5 and 7% at the end of year 10. There are no floors or caps of any kind on this loan. This loan has 3 points and 2% pre- payment penalty. Answer the following questions: a) Loan 1 Mortgage payment for any month, payable end of corresponding month = $ b) Loan 2 Mortgage payment for month 61, payable end of 61st month = $ c) Loan 2 Mortgage payment for month 121, payable end of 121st month = d) Loan 2 interest paid for the 70th month = e) Actual Interest rate for 2 loans combined, assuming you keep the house for 10 years = 2) You want to buy a house for $400,000 with 10% down payment. You take two mortgages to over the $360,000 needed to buy the house. They are: • Loan 1: Loan amount $160,000, fully amortizing 30- year fixed rate mortgage for 4.2%. This loan has 2 points and 1% pre-payment penalty. • Loan 2: Loan amount $200,000, fully amortizing 15- year, 5-year ARM with reset every five years. Initial interest rate is 3.6%. Margin set at 2% over prime rate. Expected prime rates: 4% at end of year 5 and 7% at the end of year 10. There are no floors or caps of any kind on this loan. This loan has 3 points and 2% pre- payment penalty. Answer the following questions: a) Loan 1 Mortgage payment for any month, payable end of corresponding month = $ b) Loan 2 Mortgage payment for month 61, payable end of 61st month = $ c) Loan 2 Mortgage payment for month 121, payable end of 121st month = d) Loan 2 interest paid for the 70th month = e) Actual Interest rate for 2 loans combined, assuming you keep the house for 10 years =

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