Please show complete steps nd correct.. You have a choice between the following two identical properties: Property A is priced at $150,000 with 80 percent financing at a 10.5 percentinterest rate for 20 years. Property B is priced at $160,000 with an assumable mortgage of $100,000 at 9 percent interest with 20 years remaining.Monthly payments are $899.73. A second mortgage for $20,000 can be obtained at 13 percent interest for 20 years. All loans require monthlypayments and are fully amortizing.a. With no preference other than financing, which property would you choose?b. How would your answer change if the seller of Property B provided a second mortgage for $20,000 at the same 9 percent rate as the assumableloan?C. How would your answer change if the seller of Property B provided a second mortgage for $30,000 at the same 9 percent rate as the assumableloan so that no additional down payment would be required by the buyer if the loan were assumed?

A mortgage opens the gateway to real estate ownership through a collaborative arrangement with a…

Answered: You have a choice between the following…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 41P

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You have a choice between the following two identical homes: Home A is priced at $150,000 with 80 percent financing at a 10.5 percent interest rate for 20 years. Home B is priced at $160,000 with an assumable mortgage of $100,000 at 9 percent with 20 years remaining. Monthly payments are $899.73. A second mortgage for $20,000 can be obtained at 13 percent interest for 20 years. At what opportunity rate of return (IRR) would the borrower be indifferent between Home A and Home B (expressed in decimals, rounded to three digits)?
You have a choice between the following two identical properties: Property A is priced at $162,000 with 80 percent financing at a 10.5 percent interest rate for 20 years. Property B is priced at $172,000 with an assumable mortgage of $100,000 at 9 percent interest with 20 years remaining. Monthly payments are $899.73. A second mortgage for $28,000 can be obtained at 13 percent interest for 20 years. All loans require monthly payments and are fully amortizing. Required: a. With no preference other than financing, which property would you choose? b. Which property would you choose if the seller of Property B provided a second mortgage for $28,000 at the same 9 percent rate as the assumable loan? c. Which property would you choose if the seller of Property B provided a second mortgage for $38,000 at the same 9 percent rate as the assumable loan so that no additional down payment would be required by the buyer if the loan were assumed? Complete this question by entering your answers in the…
You are considering an option to purchase or rent a single residential property. You can rent it for $2,000 per month and the owner would be responsible for maintenance, property insurance, and property taxes. Alternatively, you can purchase this property for $200,000 and finance it with an 80 percent mortgage loan at 4 percent fixed-rate interest that will fully amortize over a 30-year period. The loan requires monthly payments. The loan can be prepaid at any time with no penalty. You have done research in the market area and found that (1) properties have historically appreciated at an annual rate of 2 percent per year, and rents on similar properties have also increased at 2 percent annually; (2) maintenance and insurance are currently $1,500.00 each per year and they have been increasing at a rate of 3 percent per year; (3) you are in a 24 percent marginal tax rate and plan to occupy the property as your principal residence for at least four years; (4) the capital gains exclusion…
You are choosing between two mortgage options for a $1,000,000 property. The first option is a 60% LTV mortgage at an interest rate of 7%. The payment on this mortgage is calculated as if it were a 30 year mortgage, but the mortgage balance is due in 10 years. This loan also charges a 1% origination fee. The second option consists of two loans combined together. The primary loan (first mortgage) is a 50% LTV loan at an interest rate of 6.5%. This loan is an Interest Only loan due in 10 years and the loan charges a 1% origination fee. The secondary loan for this option is a 10% LTV loan at an interest rate of 9%. This loan is fully amortizing and is also due in 10 years and charges a 2% origination fee. What is the combined payment of the two loans that together form the 2nd loan option? Multiple Choice O $3,975.094 $3,248.4852 $2,783.4973 $1,846.7921
You are choosing between two mortgage options for a $1,000,000 property. The first option is a 60% LTV mortgage at an interest rate of 7%. The payment on this mortgage is calculated as if it were a 30 year mortgage, but the mortgage balance is due in 10 years. This loan also charges a 1% origination fee. The second option consists of two loans combined together. The primary loan (first mortgage) is a 50% LTV loan at an interest rate of 6.5%. This loan is an Interest Only loan due in 10 years and the loan charges a 1% origination fee. The secondary loan for this option is a 10% LTV loan at an interest rate of 9%. This loan is fully amortizing and is also due in 10 years and charges a 2% origination fee. What is the combined payment of the two loans that together form the 2nd loan option? Group of answer choices $1,846.7921 $2,783.4973 $3,248.4852 $3,975.094
You plan to purchase a $130,000 house using a 15-year mortgage obtained from your local credit union. The mortgage rate offered to you is 5.25 percent. You will make a down payment of 20 percent of the purchase price. a. Calculate your monthly payments on this mortgage. b. Construct the amortization schedule for the first six payments.
An investor has $60,000 to invest in a $280,000 property. He can obtain either a $220,000 loan at 9.5 percent for 20 years or a $180,000 loan at 9 percent for 20 years and a second mortgage for $40,000 at 13 percent for 20 years. All loans require monthly payments and are fully amortizing.a. Which alternative should the borrower choose, assuming he will own the property for the full loan term?b. Would your answer change if the borrower plans to own the property for only five years?c. Would your answers to (a) and (b) change if the second mortgage had a 10-year term?
You have a choice between the following two identical properties: Property A is priced at $150,000 with 80 percent financing at a 10.5 percent interest rate for 20 years. Property B is priced at $160,000 with an assumable mortgage of $100,000 at 9 percent interest with 20 years remaining. Monthly payments are $899.73. A second mortgage for $20,000 can be obtained at 13 percent interest for 20 years. All loans require monthly payments and are fully amortizing. a. With no preference other than financing, which property would you choose? b. How would your answer change if the seller of Property B provided a second mortgage for $20,000 at the same 9 percent rate as the assumable loan? c. How would your answer change if the seller of Property B provided a second mortgage for $30,000 at the same 9 percent rate as the assumable loan so that no additional down payment would be required by the buyer if the loan were assumed?
A borrower is faced with choosing between two loans. Loan A is available for $76,000 at 6 percent interest for 30 years, with 6 points to be included in closing costs. Loan B would be made for the same amount, but for 7 percent interest for 30 years, with 2 points to be included in the closing costs. Both loans will be fully amortizing. Required: a. If the loan is repaid after 20 years, which loan would be the better choice? b. If the loan is repaid after five years, which loan is the better choice?
5. you have a choice between the following two identical properties: property A is priced at $150,000 with 80% financing at a 10.5% interest rate for 20 years. Property B is priced at $160,000 with an assumable mortgage of $100,000 at 9 percent interest with 20 years remaining. Monthly payments are $899.73. A second mortgage for $20,000 can be obtained at 13 % interest for 20 years. all loans require monthly payments and are fully amortizing. 1. with no preference other than financing, which property would you choose?2. how would your answer change if the seller of property B provided at second mortgage fro $20,000 at the same 9% rate as the assumable loan?3. How would your answer change if the seller of property B provided a second mortgage for $30,000 at the same 9% rate as the assumable loan so that no additional down payment would be required by the buyer if the loan were assumed?
A property is available for sale that could normally be financed with a fully amortizing $81,200 loan at a 10 percent rate with monthly payments over a 25-year term. Payments would be $737.87 per month. The builder is offering buyers a mortgage that reduces the payments by 50 percent for the first year and 25 percent for the second year. After the second year, regular monthly payments of $737.87 would be made for the remainder of the loan term. Required: a. How much would you expect the builder to have to give the bank to buy down the payments as indicated? b. Would you recommend the property be purchased if it was selling for $5,000 more than similar properties that do not have the buydown available? Complete this question by entering your answers in the tabs below. Required A Required B How much would you expect the builder to have to give the bank to buy down the payments as indicated? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Down…
A borrower is faced with choosing between two loans. Loan A is available for $89,000 at 6 percent interest for 30 years, with 6 points to be included in closing costs. Loan B would be made for the same amount, but for 7 percent interest for 30 years, with 2 points to be included in the closing costs. Both loans will be fully amortizing. Required: a. If the loan is repaid after 20 years, which loan would be the better choice? b. If the loan is repaid after five years, which loan is the better choice? (Analyze the decision with both rates at two decimal places.)

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