Exam 15: Mortgage Calculations and Decisions

When lenders charge discount points (prepaid interest)on a loan,what impact does this have on the loan's yield?

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%.

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

Given the following information,calculate the lender's yield.Loan amount: $166,950,Term: 30 years,Interest rate: 8 %,Payment: $1,225.00,Discount points: 2.

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?

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 loan,determine the remaining balance that the borrower has at the end of seven years.Interest Rate: 7%,Monthly Payment: $1,200.

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:

Recently,15-year mortgages have increased in popularity amongst both borrowers and lenders.Which of the following groups of borrowers would typically be the least interested in a 15-year mortgage?

When fully amortizing loans call for equal periodic payments over the life of the loan they are known as:

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

While a variety of loan terms are available in a lender's mortgage menu,the most common loan term on a level-payment mortgage is:

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):

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?

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:

Given the following information,calculate the balloon payment for a partially amortized mortgage.Loan amount: $84,000,Term to maturity: 7 years,Amortization Term: 30 years,Interest rate: 4.5%,Monthly Payment: $425.62.

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 closing costs,which may consist of all of the following EXCEPT:

In considering a three-year-one-year adjustable-rate mortgage (ARM),the interest rate will be fixed for how many years?

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

Given the following information on a fixed-rate 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%.