You are considering the purchase of a new home. You intend to borrow $275,000. You are discussing financing options with a mortgage broker. The mortgage broker tells you that you may take a 30-year loan, with monthly payments, at an interest rate of 2.75%/annum. Alternately, you may take a 15-year loan, also with monthly payments, at an interest rate of 2.0%/annum. The first payment on ether loan will be due one month from the closing date of the loan.

 

 What is the monthly loan payment on the 30-year loan? 

  What is the monthly loan payment on the 15-year loan?

 

 

  What is the Effective Annual Interest Rate of the-30 year loan?

 

 

 Assume that you will live in the house for the entire term of the 30-year loan and make all payments on time, how much interest would you save by financing the house over 15 years as compared to financing it over 30 years? 

Answer rating: 100% (QA)

ANSWER a To calculate the monthly payment on the 30year loan we can use the formula for the present value of an annuity PV PMT x 1 1 r12n x 12 r12 Whe... View the full answer