Deck 15: The Cost of Home Ownership

Question 1

Graduated payments let the borrower pay more at the beginning of the mortgage and make lower payments later.

Answer 1

False

Question 2

The total of all monthly payments plus the amount of the mortgage equals the total cost of interest.

Answer 2

False

Question 3

A mortgage of $80,000 with 2 points means the borrower would have to pay at closing $800.

Answer 3

False

Question 4

The reduction of principal each month is equal to the payment minus the interest.

Question 5

A monthly payment of $850 on a 30-year $80,000 mortgage results in a total cost of interest of $226,000.

Question 6

Subprime loans are very safe.

Question 7

A variable rate mortgage is always fixed.

Question 8

A point is 1% of the amount of the loan.

Question 9

Points are to be paid off as part of the regular monthly payment.

Question 10

The major portion of the monthly payment is used to pay off the principal.

Question 11

From the table in the handbook, the monthly payment on a home purchased for $120,000 with 20% down at 8% for 25 years is $741.12.

Question 12

A biweekly mortgage results in six extra payments per year.

Question 13

Interest is equal to principal times rate divided by time.

Question 14

Using the table in the handbook, the total cost of interest on a home purchased for $200,000 with 30% down at 7% for 35 years is $235,732.

Question 15

From the table in the handbook, the monthly payment on a home purchased for $150,000 with 30% down at 13% for 30 years is $1,132.53.

Question 16

All mortgages must be paid monthly.

Question 17

Banks cannot provide amortization schedules to borrowers.

Question 18

The amount of the down payment one makes on a home directly affects the size of the monthly payment.

Question 19

Interest rates on mortgages do not vary from bank to bank.

Question 20

A larger down payment is needed for a 15-year fixed rate mortgage than for a 30-year fixed rate mortgage.

Question 21

A variable rate mortgage means:

A)The interest rate is not fixed
B)The interest rate is fixed for five years
C)The rate is not subject to change
D)Larger monthly payments than a fixed rate
E)None of these

Question 22

Points represent:

A)2% of the amount of the loan
B)Monthly payments
C)An additional cost of receiving the mortgage
D)3% up-front payment
E)None of these

Question 23

Ben Brown bought a home for $225,000. He put down 20%. The mortgage is at 6 ½% for 30 years. Using the table in the handbook, his monthly payment is:

A)$1,319.04
B)$1,319.40
C)$1,216.80
D)$1,139.40
E)None of these

Question 24

Abby's monthly payment is $781.60 per month. The principal is $80,000 at a rate of 11 1/2% for 35 years. The principal reduction after the first mortgage payment is $14.93.

Question 25

Jill Diamond bought a home for $190,000 with a down payment of $65,000. The rate of interest was 7% for 35 years. Her monthly mortgage payment is:

A)$843.75
B)$834.57
C)$798.75
D)$978.57
E)None of these

Question 26

Bill's monthly payment is $1,056 per month. The principal is $100,000 at a rate of 12 1/2% for 35 years. The amount of interest for Bill's first payment is $1,011.67.

Question 27

All mortgage payments must be paid:

A)Weekly
B)Monthly
C)Biweekly
D)Semiannually
E)None of these

Question 28

Dick Hercher bought a home in Homewood, Illinois, for $230,000. He put down 20% and obtained a mortgage for 25 years at 8%. The total interest cost of the loan is:

A)$184,000.00
B)$327,372.80
C)$242,411.00
D)$242,144
E)None of these

Question 29

Megan Mei is charged 2 points on a $120,000 loan at the time of closing. The original price of the home before the down payment was $140,000. The points in dollars cost Megan:

A)$2,400
B)$2,800
C)$4,200
D)$8,200
E)None of these

Question 30

An amortization schedule shows:

A)Balance of interest outstanding
B)The increase to principal
C)Increase in loan outstanding
D)Portion of payment broken down to interest and principal
E)None of these

Question 31

Joe Jay purchased a new colonial home for $260,000, putting down 20%. He decided to use Loyal Bank for his mortgage. They were offering a 6 1/2% for a 25-year mortgage. The principal after the first payment had a balance outstanding of:

A)$207,270.95
B)$207,720.59
C)$207,720.95
D)$207,270.59
E)None of these

Question 32

The total cost of interest is equal to the total of all monthly payments:

A)Divided by amount of mortgage
B)Minus amount of mortgage
C)Plus amount of mortgage
D)Times amount of mortgage
E)None of these

Question 33

Stu Reese has a $150,000 7 ½% mortgage. His monthly payment is $1,010.10. His first payment will reduce the principal to an outstanding balance of:

A)$149,729.40
B)$149,927.40
C)$72.60
D)$149,910.40
E)None of these

Question 34

Bill Moore took out an $80,000 mortgage on a ski chalet. The bank charged 4 points at closing. The points in dollars cost Bill:

A)$800
B)$3,200
C)$2,400
D)$1,600
E)None of these

Question 35

Chin Woo bought a home for $160,000. He put down 20%. The mortgage is at 8 1/2% for 25 years. Using the table in the handbook, his yearly payments are:

A)$1,238.00
B)$12,380.16
C)$12,830.61
D)$12,380.61
E)None of these

Question 36

Graduated payments result in the borrower paying:

A)More at the beginning of the mortgage
B)Less at the beginning of the mortgage
C)Less at the end of the mortgage
D)The mortgage at 1/2 the standard rate
E)None of these

Question 37

Craig Hammer purchased a new condominium for $225,000. The bank required a $30,000 down payment. Assuming a rate of 8% on a 25-year mortgage, Craig's monthly payment is (use the table in the handbook):

A)$1,431.30
B)$1,413.30
C)$1,505.40
D)$1,505.04
E)None of these

Question 38

Lizzy Clar bought a home for $160,000, putting down $30,000. The rate of interest is 7% for 25 years. The total yearly mortgage payment is:

A)$11,029.20
B)$11,920.20
C)$919.10
D)$18,782.40
E)None of these

Question 39

The difference between the monthly payments on a $120,000 home at 6 ½% and at 8% for 25 years is (use the table in the handbook):

A)$81.12
B)$151.02
C)$115.20
D)$91.12
E)None of these

Question 40

Abe Aster bought a new split level for $200,000. Abe put down 30%. Assuming a rate of 11 1/2% on a 30-year mortgage, Abe's monthly payment is (use the table in the handbook):

A)$1,423.80
B)$1,387.40
C)$1,367.80
D)$1,982.00
E)None of these

Question 41

Tom Burke buys a home in Virginia for $139,000. He puts down 30% and obtains a mortgage for 25 years at 12%. The portion of the first payment that covers interest is:

A)$52.54
B)$1,025.54
C)$973.00
D)$97.30
E)None of these

Question 42

Marsha Terban bought a home for $119,000 with a down payment of $19,000. Her rate of interest is 12 1/2% for 35 years. The balance of the mortgage at the end of the first month is:

A)$3.33
B)$98,944
C)$99,669.76
D)$99,985.67
E)None of these

Question 43

Jen purchased a condo in Naples, Florida, for $699,000. She put 20% down and financed the rest at 5% for 35 years. What are Jen's total finance charges?

A)$457,425.60
B)$606,823.20
C)$626,863.20
D)$600,000.00
E)None of these

Question 44

Beverly Frost bought a home for $190,000 with a down payment of $19,000 at 7% for 25 years. Since then the rate has risen to 9%. How much more would her monthly payment be if she bought the house at 9%?

A)$208.97
B)$436.40
C)$143.00
D)$227.43
E)None of these

Question 45

A condo in Orange Beach, Alabama, is listed for $1.4 million with 20% down and financing at 5% for 30 years. What would the monthly payment be?

A)$7,518
B)$6,014.40
C)$6,041.20
D)$7,815.00
E)None of these

Question 46

With a mortgage of $48,000 for 15 years with a rate of 11%, what are the total finance charges?

A)$50,236.80
B)$5,023.68
C)545.76
D)$54,576
E)None of these

Question 47

Amanda Chin purchased a home for $296,000; she put 20% down with a mortgage rate of 6% for 30 years. What is Amanda's monthly payment?

A)$1,776
B)$1,402
C)$1,240.80
D)$1,420.80
E)None of these

Question 48

Darlene Ramirez bought a home for $140,000. She put 20% down with a mortgage rate at 7.5% for 25 years. Her yearly payments are:

A)$1,776
B)$9,932.16
C)$12,415.20
D)$9,329.61
E)None of these

Question 49

A $104,000 selling price with $24,000 down at 8 1/2% for 25 years results in a monthly payment of:

A)$644.80
B)$645.60
C)$546.06
D)$654.60
E)None of these