Score: 0 of 1 pt 40122 (1 complete) Instructor-created question Hw Score: 0%, 0

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Score: 0 of 1 pt 40122 (1 complete) Instructor-created question Hw Score: 0%, 0 of 22 pts The price of a home is $190,000 Question Help * The bank requires a 20% down payment and three points at the time of closing The cost of the home is financed with a 10-year fixed-rate mortgage at 9% compounded monthly a. Find the required down payment b. Find the amount of the mortgage c. How much must be paid for the three points at closing? (Round to the nearest dollar) d. Find the monthly payment (excluding escrowed taxes and insurance) (Round to the nearest dollar) e. Find the total cost of interest over 10 years. Use the rounded answer from above as your payment Clear Al Enter your answer in the edit fields and then click Check Answer All parts showing

Explanation / Answer

Here, the price of home is $ 190000.

a.       The down payment required is 20 % of $ 190000 = $ 38000.

b.      The amount of mortgage is price of home – down payment = $ 190000- $ 38000= $ 152000.

c.       One mortgage point is equal to 1 % of the mortgage amount so that 3 mortgage points equal 3 % of the mortgage amount or 152000 * 3/100 = $ 4560. Thus, $ 4560 has to be paid for 3 points at the time of closing.

d.      The formula used for calculating the fixed monthly payment (P) required to fully amortize a loan of $ L over a term of n months at a monthly interest rate of r is P = L[r(1 + r)n]/[(1 + r)n - 1].

Here, L = $ 152000, r = 0.09/12 = 0.0075, and n = 10*12 = 120. Therefore, P = 152000[0.0075(1+0.0075)120]/[(1+0.0075)120 -1]= (152000*0.0075*2.451357078)/(1.451357078)= $ 1925.47 or, $ 1925 ( on rounding off to the nearest dollar).

e.      The total repayment to the bank is $ 1925.47 *120 + $4560 = $ 231056.40 +$4560 = $235616.40. Thus, the amount of interest paid to the bank is $235616.40 -$ 152000 = $ 83616.40 or, $ 83616 (on rounding off to the nearest dollar).

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