value 10.00 points You need a 25-year fixed-rate mortgage to buy a new home for

Question

value 10.00 points You need a 25-year fixed-rate mortgage to buy a new home for $255.000 Your mortgage bank will you the money at a 5.5 percent APR for this 300-month loan. However can only afford monthly payments of $950, so you offer to pay off any remaining loan balance at the end of the loan in the form of a single balloon payment. How large will this balloon payment have to be for you to keep your monthly payments at $950? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16) Balloon payment Hints References eBook & Resources Hint #1 Check my work

Explanation / Answer

$2,55,000 @5.5 % will become at the end of 25 years= $2,55,000 (1+0.055)25 = $ 9,71,550

Amount paid monthly till 300 months= $950*300 = $2,85,000

Ballon payment=  $ 9,71,550 - $2,85,000 =$ 6,86,550

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