Exam 15: Mortgage Calculations and Decisions

Suppose you have taken out a $125,000 fully-amortizing fixed rate mortgage loan that has a term of 15 years and an interest rate of 6%.After your first mortgage payment,how much of the original loan balance is remaining?

Given the following information on a fixed-rate fully amortizing loan,determine the maximum amount that the lender will be willing to provide to the borrower.Loan Term: 30 years,Monthly Payment: $800,Interest Rate: 6%.

The monthly mortgage payment divided by the loan amount is commonly referred to as the:

Given the following information about a fully amortizing loan,calculate the lender's yield (rounded to the nearest tenth of a percent).Loan amount: $166,950,Term: 30 years,Interest rate: 8 %,Monthly Payment: $1,225.00,Discount points: 2.

Given the following information,calculate the effective borrowing cost (rounded to the nearest tenth of a percent).Loan amount: $166,950,Term: 30 years,Interest rate: 8 %,Monthly Payment: $1,225.00,Discount points: 2,Other Closing Expenses: $3,611.

Required by the Truth-in-Lending Act,the annual percentage rate (APR)is reported by the lender to the borrower on virtually all U.S.home mortgage loans.The APR accounts for all of the following EXCEPT:

Given the following information on a 30-year fixed-payment fully-amortizing loan,determine the remaining balance that the borrower has at the end of seven years.Interest Rate: 7%,Monthly Payment: $1,200.

For the purposes of estimating the effective borrowing cost (EBC),only those up-front expenses associated with obtaining the mortgage should be included,not the settlement costs associated with obtaining ownership of the property.With this in mind,which of the following costs should not be included in one's calculation of EBC?

Suppose you have taken out a $200,000 fully-amortizing fixed rate mortgage loan that has a term of 15 years and an interest rate of 4.25%.In month 2 of the mortgage,how much of the monthly mortgage payment does the principal repayment portion consist of?

With the recent popularity of adjustable-rate mortgages (ARM),lenders have begun to offer ARMs with different adjustment periods.Which of the following ARM choices will most likely have the highest initial rate?

Let's assume that you have just taken out a mortgage loan for $200,000 with an origination fee of 2 points due upfront.The mortgage term is 30 years and the mortgage rate is fixed at 4%.What is the cost of the origination fee in dollar terms?

You have taken out a $300,000,5/1 ARM.The initial rate of 5.4% (annual)is locked in for 5 years.Calculate the payment after recasting the loan (i.e. ,after the reset)assuming the interest rate after the initial lock period is 8.0%.(Note: the term on this 5/1 ARM is 30 years)

One reason why adjustable-rate mortgages (ARMs)have become popular has to do with the impact that they have on the interest rate risk that is borne by the parties involved.If interest rates were to rise on a level-payment mortgage (LPM)the interest rate risk of the loan would typically be borne by:

To encourage borrowers to accept adjustable rate mortgages (ARMs)rather than level-payment mortgages,mortgage originators generally offer an initial short-term introductory rate that is less than the prevailing market mortgage rate.This rate is referred to as a(n):

From the borrower's perspective,the effective borrowing cost is often viewed as the implied internal rate of return (IRR),since it takes into consideration costs that the borrower faces,but which are not passed on as income to the lender.Included in this calculation are certain closing costs,which may consist of all of the following EXCEPT:

Assume that a borrower has a choice between two comparable fixed-rate mortgage loans with the same interest rate,but different mortgage terms,one being a 30-year mortgage and the other a 15-year mortgage.Under financially unconstrained circumstances,which of the following statements best describes the borrower's preference?

Given the following information on an interest-only mortgage,calculate the monthly mortgage payment.Loan amount: $56,000,Term: 15 years,Interest Rate: 7.5%.

Partially amortizing mortgage loans require periodic payments of principal,but are not paid off completely over the loan's term to maturity.Instead,the balance of the principal amount is paid at maturity in what is commonly referred to as a:

You have taken out a $350,000,3/1 ARM.The initial rate of 6.0% (annual)is locked in for 3 years.Calculate the outstanding balance on the loan after 3 years.The interest rate after the initial lock period is 6.5%.(Note: the term on this 3/1 ARM is 30 years)

Suppose a potential home buyer is interested in taking a $500,000 mortgage loan that has a term of 30 years and a fixed mortgage rate of 5.25%.What is the monthly mortgage payment that the homeowner would need to make if this loan is fully amortizing?