Question
A house can be purchased for $140000, and you have $10000 cash for a down payment. You are considering the following two financing options: bullet
A house can be purchased for $140000, and you have $10000 cash for a down payment. You are considering the following two financing options: bullet Option 1. Getting a new standard mortgage with a 7.5% (APR) interest and a 30-year term. bullet Option 2. Assuming the seller's old mortgage, which has an interest rate of 5.5% (APR), a remaining term of 25 years (the original term was 30 years), a remaining balance of $92 comma 983, and payments of $571 per month. You can obtain a second mortgage for the remaining balance ($37 comma 017) from your credit union at 9% (APR) with a 10-year repayment period.
(a) What is the effective interest rate of the combinedmortgage?
b) Compute the monthly payments for each option over the life of the mortgage.
(c) Compute the total interest payment for each option.
(d) What homeowners interest rate makes the two financing options equivalent?
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