Question

The Fritzes are buying a house that sells for $119,000. The bank is requiring a minimum down payment of 15%. To obtain a 40-year mortgage at 13.5% interest, they must pay 4 points at the time of closing.a Determine the required down payment.b) Determine the amount of the mortgage on the property with the 15% down payment.c) Find the cost of 4 points on the mortgage.

Answer 1

If the Fritzes are buying a house that sells for $119,000.

a) The required down payment is $17,850.

b) The amount of the mortgage on the property with the 15% down payment is $101,150.

c) The cost of 4 points on the mortgage is $4,046.

What is the required down payment?

a) Required down payment:

(15/100) * $119,000

= $17,850

b) Mortgage amount can be calculated as:

$119,000 - $17,850

= $101,150

c) Cost of 4 points on the mortgage:

(4/100) * $101,150

= $4,046

Therefore a) The required down payment is $17,850. b) The amount of the mortgage on the property with the 15% down payment is $101,150. c) The cost of 4 points on the mortgage is $4,046.

Answer 2

Explanations:

Given the following parameters:

Cost of house = $119,000

Minimum down payment = 15%

Interest on mortgage = 13.5%

Time required = 40 years

a) To get the required downpayment;

`\begin{gathered} \text{ Downpayment = 15\% of \$119,000} \\ \text{ Downpayment }=\text{ 0.15 }*119,000 \\ \text{ Downpayment =\$1}7,850 \end{gathered}`

Hence the required downpayment is $17,850

b) To get the amount of the mortgage on the property with the 15% down payment, we will take the difference in the cost and downpayment.

Amount of mortgage = Cost - Down payment

Amount of mortgage = $119,000 - $17,850

Amount of the mortgage = $101,150

c) To get the cost of 4-points on the mortgage, we need to first calculate the 13.5% interest on a 40-year mortgagee.

`\begin{gathered} \text{Interest}=\text{PRT} \\ \text{Interest}=119,000*0.135*40 \\ \text{Interest}=\$642,600 \end{gathered}`

Cost of 4 points on mortgage = $119,000 + $642,600

Cost of 4 points on mortgage = $761,600