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Financial Algebra © Cengage/South-Western Slide PURCHASE A HOME Estimate closing costs. Create an amortization table for a fixed rate mortgage. Create an amortization table for a fixed rate mortgage with extra payments. Investigate the amortization table for an adjustable rate mortgage. OBJECTIVES
Financial Algebra © Cengage Learning/South-Western Slide 2 recurring costs non-recurring costs closing closing costs earnest money deposit attorney fee origination fee title title search points origination points discount points prepaid interest arrears transfer tax amortization table initial rate adjustment period hybrid ARM Key Terms
Financial Algebra © Cengage Learning/South-Western Slide 3 Example 1 How much will be charged in prepaid interest on a $400,000 loan with an APR of 6% that was closed on December 17?
Financial Algebra © Cengage Learning/South-Western Slide 4 Example 2 Shannon had to make a down payment of 15% of the selling price of her house. She was approved for a $340,000 mortgage. What range of costs might she expect to pay at the closing?
Financial Algebra © Cengage Learning/South-Western Slide 5 EXAMPLE 3 Trudy and Tom have been approved for a $300,000, 15-year mortgage with an APR of 5.75%. How much of their first monthly payment will go to interest and principal?
Financial Algebra © Cengage Learning/South-Western Slide 6 EXAMPLE 4 How can Trudy and Tom get an accounting of where their monthly payments will go for the first year of their mortgage?
Financial Algebra © Cengage Learning/South-Western Slide 7 Chris and Gene have a 6-month adjustable 15-year mortgage. They borrowed $300,000 and were quoted an initial rate of 5%. After 6 months, their rate increased by 1%. Examine the following spreadsheet for the first year of payments. How were the amounts for payment 7 calculated? EXAMPLE 5
Financial Algebra © Cengage Learning/South-Western Slide 8 How much of a difference did the 1% adjustment in interest rate make in the monthly payment and the amounts towards interest and principal? CHECK YOUR UNDERSTANDING
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