Exam 13: Loan Amortization: Mortgages

A car loan is to be repaid by equal monthly payments for four years. The interest rate is 7.2% compounded monthly and the amount borrowed is $17,355. How much interest will be included in the first payment?

A mortgage balance of $17,321.50 is renewed for a 3-year period at 8% compounded semiannually. Determine the amount of interest paid in the 3^rd year.

$10,000 is to be repaid quarterly monthly over two years at 7.85% compounded semi-annually. Construct an amortization schedule for the loan. How much interest is paid in total?

A $67,800 loan is to be repaid by equal annual payments for 15 years. The interest rate is 8.3% compounded annually. How much interest will be included in the first payment?

Mona calculated her Total Debt Service Ratio to be 35%, given a gross monthly income of $5,800 per month. If her other debt amounted to $250 and her utilities and condo fees were another $300, then determine how much her monthly mortgage payments are.

A car loan of $18,290 is to be repaid by equal monthly payments for three years. The interest rate is 1.8% compounded monthly. Calculate the total amount of interest the car buyer will pay?

Grace calculated her Gross Debt Service Ratio as 24%. If her monthly mortgage payments are $980 per month, while monthly property taxes and hydro total another $180 per month, determine her gross monthly income.

A $100,000 mortgage at 6.8% compounded semi-annually with a 20-year amortization requires monthly payments. The mortgage allows the mortgagor to "double up" on a payment once each year. How much will the amortization period be shortened if the borrower doubles the eighth payment?

A loan of $32,000 at 6% compounded annually is to be repaid by equal payments at the end of every month for three years. How much interest will be included in the 19^th payment?

A loan of $12,000 with interest at 14% compounded annually is to be amortized by equal payments at the end of each year for six years. -How much interest is included in the third payment?

A marketing innovation is the "cash-back mortgage" wherein the lender gives the borrower an up-front bonus cash payment. For example, if you borrow $100,000 on a 3% cash-back mortgage loan, the lender will give you $3,000 in addition to the $100,000 loan. You pay back only the $100,000 principal over the amortization period. The $3,000 can be immediately applied as a prepayment to reduce the principal balance (to $97,000) or it can be used for any other purpose. You must keep your mortgage with the lender for at least five years. The cash-back mortgage seems like a good deal but there is more you need to know about advertised mortgage interest rates. The rates you see posted in your local financial institution are just a starting point for negotiations. You can get ¼% knocked off just by asking for it. With some firm negotiating, you can probably get a ½% reduction. If the institution really wants your business, you can get a ¾%, or even a 1% reduction. However, if you take advantage of some other promotion such as a cash-back offer, you will not get any rate discount. So the cash-back offer is not as good as it initially appears. Which of the following loans should be chosen by the borrower? 1)A standard $100,000 mortgage loan at 6.5% compounded semi-annually? 2)A 3% cash-back mortgage loan for $100,000 at 7.25% compounded semi-annually? In both cases, the interest rate is for a five-year term and the payments are based on a 25-year amortization. For the cash-back mortgage, assume that the $3,000 cash bonus is immediately applied to reduce the balance to $97,000. (Since the monthly payments are based on the $100,000 face value, the prepayment will shorten the time required to pay off the loan.) Assume money can earn 4.8% compounded monthly.

An $80,000 loan is amortized by monthly payments over 25 years. The interest rate charged is 10% compounded semi-annually. -What will the principal balance be after three years?

Larissa bought a stereo for $5,000. She made a down payment of $1,000, and financed the balance with monthly payments over four years at 8.5% compounded quarterly. Construct a partial amortization schedule showing details of the first two payments, payments 22 and 23, and the last two payments. How much interest did Larissa pay in total?

A $33,950 loan at 10.6% compounded semi-annually is to be paid off by a series of $4,000 payments that will be made at the end of every six months. How much of the 10^th payment will be credited towards reduction of the principal?

A $15,000 personal loan carries a 5.5% interest rate, compounded semi-annually, and is to be repaid quarterly over a 4-year period. Determine the amount of interest paid in the second year.

A car loan is to be repaid by equal monthly payments for four years. The interest rate is 7.2% compounded monthly and the amount borrowed is $17,355. In total, how much interest will be paid?

A $13,000 loan is to be amortized by equal monthly payments for five years. The interest rate is 12% compounded monthly. -How much interest will the debtor pay in total over the five-year period?

An $80,000 loan is amortized by monthly payments over 25 years. The interest rate charged is 10% compounded semi-annually. -A $3100 item is paid for by end-of-month payments of $350. The interest rate charged is 15% compounded monthly. What is the size of the final payment?

The Davidson's have a lump sum amount of $60,000 saved up and have the budget to pay $2,500 at the start of each month for mortgage payments over 25 years. Determine the price of the home they can afford given interest rates are at 5.95% compounded monthly.

The Robinson family is considering purchasing a house in the Ottawa area for $650,000. They wish to amortize the loan over 25 years, and pay for the mortgage through monthly payments over 3 years at a current interest rate of 5.8% compounded monthly. They family is calculating the change in interest rates if at the end of the third year interest rates change from 5.8% to 6.1% compounded monthly. Determine the value of the current payment and the new payment after year 3.