A. You are purchasing a business building valued at $317,000. You can find a mor
ID: 3325903 • Letter: A
Question
A. You are purchasing a business building valued at $317,000. You can find a mortgage at 6.9% if you can put 17.5% down. You believe your business can support a $1,750 a month mortgage payment (not including taxes and insurance). Should you select a 25-year mortgage or a 30-year mortgage? Tell your reasons.
B. If your yearly taxes for the building will be $1,800 and the insurance for the building will be $1,720 per year, what will the total of the PITI for the mortgage be?
C. Compute what the unpaid principal balance will be after you’ve made three payments on the mortgage.
D. What will the new annual taxes on the property be if the assessed valuation is 60% of purchase price and the new tax rate is $1.85 per $100 of assessed valuation?
Explanation / Answer
Solution:
A) $317,000*0.175 = 55,475
$317,000-55,475 = 261,525
(261525/1,750)*5.37 = 802.50 mortgage payment for 30 years
(261525/1,750)*5.85 = 874.24 mortgage payment for 25 years
Both mortgage options are below the $1,750-budget and the best is the 30 year-mortgage payment.
B) 1,800/12 = 150.00
1,720/12= 143.33
PITI Payment = 802.50 +150+ 143.33
PITI Payment = $1095.83
C) 1st month
Interest = mortgage amount x (6.9%/100%)/12
= 261,525 x(6.9%/100%)/12
= 1503.76
Therefore 802.50-1503.76 was higher by 701.26
= 261,525-1503.76
=$260021.24 is the unpaid principal balance after the three-month payments
2nd Month
260021.24 x(6.9%/100%)/12
= 1495.12
=802.50-1495.12 was higher by 692.62
261,525-1495.12
=260029.88
3rd Month
260021.24x(6.9%/100%)/12
= 1495.12
=260021.24-1495.12
= 258526.12
d) =317,000*0.6
=190200
=190200(1.85/100)
=$3518.7
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