Question

Help me with Balloon Mortgages?

1.    

A bank is advertising the following mortgage:

$245,000
20/4 balloon
5.8% annual rate

Monthly Payment: $1,727.11
Balloon Payment: $216,789.79

What is the total cost of this balloon mortgage?

Answer 1

I just answered this question. Here's my answer.

Home price is $245,000. There is no down payment mentioned.
I understand 20/4 as amortized over 20 years and balloon payment after 4 years.

Total cost would be = Balloon payment + Total monthly payment

4 years x 12 months = 48 months
Balloon payment = 216,789.79 x 1 mo = 216,789.79
Total monthly payment = 1,727.11 x 47 mos = 81,174.17

Total cost = 216,789.79 + 81,174.17 = 297,963.96