QUESTION 10 10 points Save Answer You can afford to pay up to $2000 in payments

Question

QUESTION 10 10 points Save Answer You can afford to pay up to $2000 in payments every month for housing and have $80,000 in savings (you don't anticipate and increase in income/savings). Which of the following mortgages would allow you to buy the most expensive property? A 25 year FRM with 2.5% contract interest rate and .9 LTV. A 30 year fully amortizing FRM with 4.2% contract interest rate and .85 LTV A 30 year FRM with 4.2% contract interest rate, .9 LTV and a balloon payment of $80,000 at the end of the 5th year A"year mortgage with an interest only period of 5 years at '-: a fixed contract rate 3% and 0.95 LTV

Explanation / Answer

Q10 Amouunt Available in savings $80,000 Payment every month $2,000 A 25 year FRM with 2.5% contract interest and0.9 LTV A Monthlyinterest=(2.5/12)% 0.002083333 B Number of months=25*12 300 C Monthly repayment $2,000 D Present Value of Repayment at $2000 per month $445,814.85 (using Excel PV function with rate=0.002083, Nper=300,Pmt=-2000,) E LTV 0.9 F=D/E Property value $495,349.83 G=F-D Down Payment $49,534.98 $495,349.83 $481,157.17 $526,787.93 A 30 year FRM with 4.2% contract interest and0.85 LTV $ 443,950.43 A Monthlyinterest=(4.2/12)% 0.0035 B Number of months=30*12 360 C Monthly repayment $2,000 D Present Value of Repayment at $2000 per month $408,983.59 (using Excel PV function with rate=0.0035, Nper=360,Pmt=-2000,) E LTV 0.85 F=D/E Property value $481,157.17 G=F-D Down Payment $72,173.57 A 30 year FRM with 4.2% contract interest and0.9 LTV and baloon Payment of 8000 at the endof 5 years A Monthlyinterest=(4.2/12)% 0.0035 B Number of months=30*12 360 C Monthly repayment $2,000 D Present Value of Repayment at $2000 per month $408,983.59 (using Excel PV function with rate=0.0035, Nper=360,Pmt=-2000,) E LTV 0.9 F Present Value of baloon Payment $65,125.55 (80000/((1.042)^5) G=D+F Total Payment $474,109.14 H=G/E Property value $526,787.93 G=F-D Down Payment $52,678.79 Balance amount available after paying down payment $27,321.21 He will not have the amount for paying both down payment and Baloon Payment A 30 year mortgage with interest only for 5 yearsandfixed rate3% contract interest and0.95 LTV Interest rate 0.0025 Monthly Payment after 60months $2,000 Number of months payment after 5 years              300.00 (25*12) X Value of monthly payment at end of 5 years $421,752.91 (using Excel PV function with rate=0.0025, Nper=300,Pmt=-2000,) Y LTV 0.95 Z=X/y Property value $ 443,950.43 Monthly interest payment for 5 years $      1,109.88 (443950.43*0.0025) Maximum Property value affordable $495,349.83 A 25 year FRM with 2.5% contract interest and0.9 LTV He can purchase propert Value=526,787.93 if he can afford $80,000 Baloon payment and $52678.79

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