Question
A house with price of $500,000 20% down payment and loan amount $400.000 30-year fixed rate mortgage with interest rate as follows: Choice Mortgage Rate
A house with price of $500,000
20% down payment and loan amount $400.000
30-year fixed rate mortgage with interest rate as follows:
| Choice | Mortgage Rate | Points |
| a | 3.5% | 0 |
| b | 3.375% | 2 |
| c | 3.125% | 3 |
| d | 3.875% | -1 |
Suppose that there is $8,500 origination cost.
i. What is the effective cost for each choice if you will hold the mortgage for 30 years?Which choice would you like to make?
ii. What is the effective cost for each choice if you will hold the mortgage for only 12months? Which choice would you like to make?
iii. Based on the answers above, which mortgage choices (b, c and d) are not properly priced? Why?
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The Changing Geography Of Banking And Finance
Authors: Pietro Alessandrini ,Michele Fratianni ,Alberto Zazzaro
1st Edition
1441947205, 978-1441947208
