Stephanie and Joseph purchased a home for $275,000 in Hi-Gro City. They had to pay $55,000 as
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Question:
Stephanie and Joseph purchased a home for $275,000 in Hi-Gro City. They had to pay $55,000 as downpayment and obtained a 30-year mortgage loan from a bank for the remaining amount. Two years later, the value of their home rose by 30 percent. Assuming that after making two years of payments on the 30-year mortgage, the outstanding mortgage balance was still $205,000. How much equity does the buyer have in her home?What rate of return have they earned on their initial $55,000 investment?
- Amount of loan principal when home was purchased (at closing): Use by subtraction and by multiplication
- Market value of their home two years later:
- Stephanie's and Joseph's equity in the home two years later:
- Their rate of return:
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