19.

Explain, using complete sentences, the advantages and disadvantages of a balloon mortgage. (6 points)

20.

Howard must decide if he will purchase discount points for his mortgage. Two discount points which cost 2% of the mortgage amount will result in a 0.5% decrease in the interest rate. The terms of the mortgage are shown below. Howard plans to stay in his house for about five years. Should Howard purchase the two discount points? Explain your reasoning. (6 points)

Howard's Mortgage $423,000 30 year fixed
5% annual rate 0 discount points M = $2,270.76	4.5% annual rate 2 discount points M = $2,143.28

21.

How are discount points and origination fees different? How are they the same? Explain in complete sentences. (6 points)