For this project you will have to contact a local bank and get information about their mortgage
Question:
For this project you will have to contact a local bank and get information about their mortgage products. You would like to finance the purchase of a new house. The house is worth $390,000. And you want to finance it for 30 years (I know that the rates you get will depend on your credit score, but ask about the different products assuming you have outstanding credit. Do not give the banks any of your personal info….). You are putting down 25% of the house value. How does the payment compare to the one you calculated?
Loan Amount: Assume that you will finance 75% of the purchase of the home plus closing costs. (This means that to your loan amount (75% Value of the house + Closing Costs)
On an excel worksheet calculate the following:
SCENARIO 1
- Calculate the monthly rate that will be used to pay your loan. How does this compare to the amount given by the bank. Is it different or is it the same?
- Number of Periods
- Monthly Payment
- How much will you have to pay in interest payments throughout the life of the loan (total interest paid)?
- What is the effective Rate?
- What is the principal amount left to pay half way though the life of the loan (15 years)?
Please help with the missing parts of the chart. Is what I already have filled out in the chart correct?
Scenario Analysis
In order to save time and effort, the easiest way to do this is to copy your entire worksheet onto another one of the tabs in the workbook. (Look at instructions on how to do this below)
SCENARIO 2
- Based on Scenario 1, what happens to your effective rate, monthly payment and total interest throughout the life of the loan if, a) your rate (APR) drops by 0.5%? and, b) what happens if it increases by 0.5% ?
Engineering Economy
ISBN: 978-0132554909
15th edition
Authors: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling