Question

You need a 30-year, fixed-rate mortgage to buy a new home for $235,000. Your mortgage bank will lend you the money at an APR of 5.35 percent for this 360-month loan. However, you can afford monthly payments of only $925, so you offer to pay off any remaining loan balance at the end of the loan in the form of a single balloon payment. How large will this balloon payment have to be for you to keep your monthly payments at $925? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Balloon payment

Answer 1

The balloon payment needed to keep the monthly payments at $925 would be approximately $130,025.64.

Step-by-step explanation:

To determine the balloon payment, we need to calculate the remaining loan balance at the end of the loan term. The loan amount is $235,000, the APR is 5.35%, and the loan term is 30 years (360 months). We can use the formula for the remaining loan balance:

Remaining Balance = Loan Amount x (1 + Monthly Interest Rate)^Number of Months - Monthly Payment x ((1 + Monthly Interest Rate)^Number of Months - 1) / Monthly Interest Rate

Plugging in the values, we get:

Remaining Balance = $235,000 x (1 + 0.0535/12)^360 - $925 x ((1 + 0.0535/12)^360 - 1) / (0.0535/12)

Calculating this expression, the balloon payment will need to be approximately $130,025.64 in order to keep the monthly payments at $925.

Answer 2

$343,995.87

Step-by-step explanation:

The computation is shown below;

But before that we need to determine the present value

Given that

PMT = $925

I = 5.35% ÷ 12 = 0.4458333%

FV = 0

N = 360

The formula is given below:

= -PV(RATE;NPER;PMT;FV;TYPE)

SO, the PV is $165,647.87

Now The amount of principal still pending is

= $235,000 - $165,647.87

= $69,352.13

Now the balloon payment is

= $69,352.13 × (1 + (5.35% ÷ 12))^360

= $343,995.87