FHCE 2100 Lecture Notes - Lecture 39: Federal Housing Administration, Negative Amortization, Graduated Payment Mortgage Loan

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amaranthsquirrel732

16 Nov 2016

School

University of Georgia

Department

Financial Planning, Housing and Consumer Economics

Course

FHCE 2100

Professor

Dr.Kabaci

For unlimited access to Class Notes, a Class+ subscription is required.

Document Summary

Add closing costs to loan amount, and then calculating a new monthly payment at loan"s interest rate. In this case, if you borrowed (,000. 00 + ,800. 00) at 3. 75% for 15 years, your apr monthly payment would be ,343. 77. Notice that this is different than your actual payment of ,272. 50. Calculate what interest rate produces a monthly payment equal to the apr payment amount. In this case, we calculate the interest rate that would require a ,343. 77 monthly payment on a loan of 15 years in the amount of ,000. 00. The result is 4. 067% which is the apr for your loan. The apr for a loan with no fees is always the same as the stated interest rate. Interest rate won"t change for the life of the loan. Typically offer a lower interest rate and apr. Higher rates than adjustable or variable loans. Better to have an adjustable rate if you plan to move in 5-10 years.

Related Questions

Finance Tutor Help ASAP: APR/ IRR Please answer all questions from a through e

Youâre given with a 5-year auto loan from your credit union. Suppose the total loan you have is $25,000 and the current market interest rate is 5.2% for the short-term loans with the same creditability as yours. Answer the following questions: (Show Solution)

a)Given that the APR (namely the Annual Percentage Rate. That is, the stated interest agreed on the loan) of the loan is 5.2% per year, what is the monthly payment if youâre intended to have the loan for 5 years?

b)What is the effective annual rate if the loan is compounded monthly?

c)Suppose the credit union says that if youâd like to retire the loan earlier, say at the end of the 3^rd year, you need to pay (say) $13,000 for the rest of the loan, would you take it given that you have no difficulty to generate the cash flow? Why or why not?

d)Suppose the original agreement that you signed with credit union is to have a 3-year loan and pay back the loan with $13,200 at the end of year 3, how much will be your monthly payment now?

e)Given that the present value of the loan which is $25,000 now, what is the Internal Rate of Return (IRR) for this loan? Is this rate different from the 5.2% market interest rate? Why or why not?

Thank you for the assistance.

Problem 6.35

Loan Amortization

Trevor Diaz is looking to purchase a Mercedes Benz SL600 Roadster which has an invoice price of $121,737 and a total cost of $129,482. Trevor plans to put down $20,000 and will pay the rest by taking on a 5.75 percent five-year loan from Bank of America. What is the monthly payment on this auto loan? Prepare an amortization table using Excel.

a. What is the monthly payment on this auto loan?

Hint: Use the present value of an annuity equation to solve for the monthly payment and then use the PMT financial function to solve: PMT(rate,nper,pv,fv,type). The present value of the annuity is the total amount borrowed. Make sure that all cells are properly formatted.

Cost of new car:

Down payment:

Loan amount:

Interest rate on loan:

Term of loan (years):

Frequency of payment:

Monthly payment on loan:

b. Prepare an amortization table using Excel.

Hint: Insert the proper equation in each column and copy down the appropriate number of periods. Calculate total interest, principal, payments, and ending balance using the template below.

Loan amount:

Interest rate on loan:

Term of loan:

Frequency of payment:

Payment#	Payment	Interest	Principle	Balance
				$0.00
1
2
3
4
5
6
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60
Totals:

ultramarinecoyote15

Problem 6.35		Loan Amortization

Trevor Diaz is looking to purchase a Mercedes Benz SL600 Roadster which has an invoice price of $121,737 and a total cost of $129,482. Trevor plans to put down $20,000 and will pay the rest by taking on a 5.75 percent five-year loan from Bank of America. What is the monthly payment on this auto loan? Prepare an amortization table using Excel.



a. What is the monthly payment on this auto loan?

Hint: Use the present value of an annuity equation to solve for the monthly payment and then use the PMT financial function to solve: PMT(rate,nper,pv,fv,type). The present value of the annuity is the total amount borrowed. Make sure that all cells are properly formatted.



	Cost of new car:
	Down payment:
	Loan amount:
	Interest rate on loan:
	Term of loan (years):
	Frequency of payment:

	Monthly payment on loan:
	Monthly payment on loan:

b. Prepare an amortization table using Excel.

Hint: Insert the proper equation in each column and copy down the appropriate number of periods. Calculate total interest, principal, payments, and ending balance using the template below.


	Loan amount:
	Interest rate on loan:
	Term of loan:
	Frequency of payment:

Payment#	Payment	Interest	Principle	Balance
				$0.00
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
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40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
Totals:

emeraldkangaroo100

FHCE 2100 Lecture Notes - Lecture 39: Federal Housing Administration, Negative Amortization, Graduated Payment Mortgage Loan

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