Question: When obtaining a mortgage, one choice you make is whether to pay points in exchange for a lower interest rate. Decide whether to do so.

When obtaining a mortgage, one choice you make is whether to pay points in exchange for a lower interest rate. Decide whether to do so.

Scenario Details:

Amount of mortgage: $500,000

Other closing costs: $6,500

Length of mortgage: 30 years

Mortgage interest compounds monthly, and payments are monthly

Expected duration of residence: 4 years

Mortgage Options:

Mortgage A

Interest rate: 7.5%

Mortgage B

Interest rate: 7.0%

What is the payment for Mortgage A (rounded to two decimal places)?

What is the payment for Mortgage B (rounded to two decimal places)?

When you payoff your mortgage in four years, how much will that lump sum payment be for Mortgage A? Be sure to use the rounded mortgage payment in this calculation.

Step by Step Solution

★★★★★

3.36 Rating (162 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

To determine whether paying points for a lower interest rate is worthwhile we need to compare the to... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

The following additional information is available for the Dr. Ivan and Irene Incisor family from Chapters 1-5. Ivan's grandfather died and left a portfolio of municipal bonds. In 2012, they pay Ivan...

Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...

KYC's stock price can go up by 15 percent every year, or down by 10 percent. Both outcomes are equally likely. The risk free rate is 5 percent, and the current stock price of KYC is 100. (a) Price a...

The remaining questions explore how the answers change if you repay the mortgage after just one year. Usina a discount rate of 4.6%, what is the present value of the cash flows associated with...

When you payoff your mortgage in four years, how much will that lump sum payment be for Mortgage A? Be sure to use the rounded mortcace davment in this calculation. QUESTION 5 When you pay off your...

When obtaining a mortgage, one choice you make is whether to pay points in exchange for a lower interest rate. This homework asks you to work through the math to decide whether to do so . Scenario...

When obtaining a mortgage, one choice you make is whether to pay points in exchange for a lower interest rate. This homework asks you to work through the math to decide whether to do so. Scenario...

When obtaining a mortgage, one choice you make is whether to pay points in exchange for a lower interest rate. This homework asks you to work through the math to decide whether to do so . Scenario...

When obtaining a mortgage, one choice you make is whether to pay points in exchange for a lower interest rate. This homework asks you to work through the math to decide whether to do so. Scenario...

You will need to add some things to this model to compute the integral square error. The objective function should call the model (using the sim command) to compute the integral square error. Matlab...

A Real Estate Inc. problem has two classes. It includes ?House Seller? and ?House Buyer?. Here the class House Seller is taken to be processed further. Invariant in CRC card Invariant is a type of...

Which of the following property is covered under the personal property coverage ( Coverage C ) of HO - 3 ?

Mezen is currently considering the launch of a new product. A market survey was recently commissioned to assess the likely demand for the product and this showed that the product has an expected life...

Vanco Company has 35 employees who work 8-hour days and are paid hourly. On January 1, 2013, the company began a program of granting its employees 10 days of paid vacation each year. Vacation days...

Select one of the Nobel laureate professors in finance and briefly describe his or her

Assignment Description: You are an investment advisor for a large investment advising firm in Australia. A client wants to invest a substantial amount of money in either Woolworths Group Ltd or a new...

Assume stock A costs $100 at t = 0 in a two-period world. There are two scenarios 1: good and bad. In the good scenario the stock price rises to 120 dollars and in the bad scenario stock price...

The securities characteristic line isGroup of answer choicesThe straight line of all efficient portfolios that investors are confronted with in equilibriumThe straight line that links the expected...

During 2012, Palo Fiero purchases the following property for use in his manufacturing business: Palo uses the accelerated depreciation method under MACRS, if available, and does not make the election...

Ray and Maria Gomez have been married 3 years. They live at 1610 Quince Ave., McAllen, TX 78701. Ray works for Palm Oil Corporation and Maria works for the City of McAllen. Maria's Social Security...

Olive Corporation was formed and began operations on January 1, 2012. The corporation's income statement for the year and the balance sheet at year-end are presented below. The corporation made...

Explain the concept of latent learning.

Explain how Khlers studies demonstrated that animals can learn by insight.

Apply classical conditioning to examples of phobias and taste aversions.