Chapter 8 Mortgages

8.1 Mortgage Fundamentals

  • Jim borrowed $8000 at 6.5% compounded monthly and agreed to repay the loan in equal quarterly payments over four years.

    1. How much of the fifth payment will be interest?
    2. What will be the principal component of the 11th payment?

  • Fran obtained a $50,000 home equity loan at 6.25% compounded monthly.

    1. What will she pay monthly if the amortization period is 15 years?
    2. How much of the payment made at the end of the fifth year will go toward principal and how much will go toward interest?
    3. How much interest will she pay in total?

  • Jeff can afford a maximum mortgage payment of $1900 per month. What is the maximum mortgage loan he can afford if the amortization period is 25 years and the interest rate is 5.25% compounded semi-annually? What is the total interest paid on the mortgage?

  • The Johnsons are nearing the end of the first five-year term of a $550,000 mortgage loan with a 25-year amortization. The interest rate has been 4.25% compounded semiannually for the initial term. How much will their monthly payments decrease if the interest rate upon renewal is 4.1% compounded semiannually?

  • Create a partial loan repayment schedule showing details of the first 2 payments and the last 2 payments. The loan amount is $750,000 with biweekly payments at a rate of 4.5% compounded semi-annually over 25 years. What is the total amount of interest paid?

  • Create a partial loan repayment schedule showing details of the first 2 payments and the last 2 payments. The loan amount is $675,000 with monthly payments at a rate of 4.85% compounded semi-annually over 25 years. What is the total amount of interest paid?