Can I please get some help with an assignment? (Real Estate Principles; Mortgages) Both documents are attached.

Thank you in advance

Project 2 - Mortgages RE 3010, Excel Project Assigned: Due date: Wednesday, Oct 19, 2016 Wednesday, Oct 26, 2016 by 9:00 AM Submit on iCollege, upload completed Excel file under Assessments, Dropbox, Project 2. Late projects penalized 20 points per day, starting at 9:01 AM on October 26. Objective - Create Mortgage Amortization Spreadsheet Each student should submit their response based on the Actual project assumptions. An Example project with similar mechanics and its solution is provided below for guidance. Each student is required to create their own Excel file. Example, Part I: Amortization, Level-payment Mortgage Consider the following loan information. Property Price $175,000 Loan Amount $150,000 Down Payment $26,500 Ending Balance $0 LTV Interest rate Compounding Term Property taxes Hazard insurance PMI 85.7% 4.5% (annual) Monthly 30 (in years) Annual amounts $1,200 $600 $750 Also, assume that the loan includes discount points equal to 1% of the loan balance to be paid up-front at closing. Further, assume that there is a prepayment penalty equal to 3% of the outstanding balance at the time of prepayment. 1 1. What is the loan payment (a) principal and interest only, and (b) total payment (including property taxes, hazard insurance and PMI)? Loan payment Taxes Insurance PMI Total payment $760.03 (principal & interest only) $100.00 $50.00 $62.50 $972.53 2. Create an amortization spreadsheet which shows for every month of the loan: (1) the beginning balance, (2) the interest component of the mortgage payment, (3) the principal component of the mortgage payment, and (4) the mortgage loan balance at the end of the month. First 30 months: Month 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Beg balance $150,000 $149,802 $149,604 $149,405 $149,205 $149,005 $148,804 $148,602 $148,399 $148,195 $147,991 $147,786 $147,580 $147,374 $147,166 $146,958 $146,749 $146,539 $146,329 $146,118 $145,905 $145,693 $145,479 $145,264 $145,049 $144,833 $144,616 $144,398 $144,180 $143,961 Interest $563 $562 $561 $560 $560 $559 $558 $557 $556 $556 $555 $554 $553 $553 $552 $551 $550 $550 $549 $548 $547 $546 $546 $545 $544 $543 $542 $541 $541 $540 2 Principal $198 $198 $199 $200 $201 $201 $202 $203 $204 $204 $205 $206 $207 $207 $208 $209 $210 $211 $211 $212 $213 $214 $214 $215 $216 $217 $218 $219 $219 $220 End balance $149,802 $149,604 $149,405 $149,205 $149,005 $148,804 $148,602 $148,399 $148,195 $147,991 $147,786 $147,580 $147,374 $147,166 $146,958 $146,749 $146,539 $146,329 $146,118 $145,905 $145,693 $145,479 $145,264 $145,049 $144,833 $144,616 $144,398 $144,180 $143,961 $143,740 Last 30 months: Month 331 332 333 334 335 336 337 338 339 340 341 342 343 344 345 346 347 348 349 350 351 352 353 354 355 356 357 358 359 360 Beg balance $21,527 $20,848 $20,166 $19,481 $18,794 $18,105 $17,413 $16,718 $16,021 $15,321 $14,618 $13,913 $13,205 $12,495 $11,781 $11,066 $10,347 $9,626 $8,902 $8,175 $7,446 $6,714 $5,979 $5,241 $4,501 $3,758 $3,012 $2,263 $1,512 $757 Interest $81 $78 $76 $73 $70 $68 $65 $63 $60 $57 $55 $52 $50 $47 $44 $41 $39 $36 $33 $31 $28 $25 $22 $20 $17 $14 $11 $8 $6 $3 Principal $679 $682 $684 $687 $690 $692 $695 $697 $700 $703 $705 $708 $711 $713 $716 $719 $721 $724 $727 $729 $732 $735 $738 $740 $743 $746 $749 $752 $754 $757 End balance $20,848 $20,166 $19,481 $18,794 $18,105 $17,413 $16,718 $16,021 $15,321 $14,618 $13,913 $13,205 $12,495 $11,781 $11,066 $10,347 $9,626 $8,902 $8,175 $7,446 $6,714 $5,979 $5,241 $4,501 $3,758 $3,012 $2,263 $1,512 $757 $0 3. What is the APR that would be reported for this loan? APR 4.59% 4. What would be the cost of borrowing if you pay off the loan at the end of 7 years (end of month 84)? Cost of borrowing 3 5.01% 5. Create three graphs to show (1) the interest component of the mortgage payment, (2) the principal component of the mortgage payment, and (3) the outstanding balance at the end of each month over the life of the loan. Interest Component of the Payment $600 $500 $400 $300 $200 $100 $0 0 36 72 108 144 180 216 252 288 324 360 324 360 324 360 Principal Component of the Payment $800 $700 $600 $500 $400 $300 $200 $100 $0 0 36 72 108 144 180 216 252 288 Outstanding Balance $160,000 $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0 0 36 72 108 144 180 216 4 252 288 Example, Part II: Amortization, Adjustable-rate Mortgage 6. Create the amortization spreadsheet and answer the following questions for a $675,000 10-year adjustable-rate mortgage (ARM) loan that is fully-amortizing and has monthly payments. A teaser rate of 2.4% applies to the mortgage payments and amortization during the first 2 years of the loan. After the second year, the annual interest rate on the loan is equal to the going rate on an index + a margin of 1.7%, subject to an annual interest rate cap of 2.3% and a lifetime interest rate cap of 5.5% over the initial teaser rate. Expectations for the beginning-of-year values for the appropriate index are as follows: Year 3 4 5 6 7 8 9 10 Index 2.1% 4.7% 6.5% 1.5% 1.9% 5.1% 6.6% 6.0% a) Based on these expectations and conditions, what would be the actual interest rates applied to the mortgage payment during years 1 thru 10? Year 1 2 3 4 5 6 7 8 9 10 Actual rate 2.4% 2.4% 3.8% 6.1% 7.9% 3.2% 3.6% 5.9% 7.9% 7.7% b) What will be the outstanding balance at the end of year 6? $304,955 c) Create an amortization spreadsheet which shows for every month of the loan: (1) the beginning balance, (2) the interest component of the mortgage payment, (3) the principal component of the mortgage payment, and (4) the mortgage loan balance at the end of the month. First 5 months: Month 1 2 3 4 5 Beg balance $675,000 $670,017 $665,025 $660,022 $655,010 Payment $6,333 $6,333 $6,333 $6,333 $6,333 Interest $1,350 $1,340 $1,330 $1,320 $1,310 Principal $4,983 $4,993 $5,003 $5,013 $5,023 End balance $670,017 $665,025 $660,022 $655,010 $649,987 Payment $7,208 $7,208 $7,208 $7,208 $7,208 Interest $227 $182 $137 $92 $46 Principal $6,981 $7,026 $7,071 $7,116 $7,162 End balance $28,375 $21,349 $14,278 $7,162 $0 Last 5 months: Month 116 117 118 119 120 Beg balance $35,357 $28,375 $21,349 $14,278 $7,162 5 Example, Part III: Loan Comparison Consider the following loan information. Months Loan amount Rate Points Prepay Payment APR Loan A 360 $150,000 5.0% 0% 0% $805.23 5.00% Loan B 360 $150,000 4.5% 1% 3% $760.03 4.59% 7. Create a table in a separate spreadsheet than the one used for the analysis in Part I, which shows (a) the loan payoff amount at the end of each year (outstanding balance plus the prepayment penalty), and (b) the cost of borrowing, assuming that the loan is paid off at that point in time. Loan A Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Payoff $147,787 $145,461 $143,015 $140,445 $137,743 $134,903 $131,918 $128,779 $125,481 $122,013 $118,368 $114,537 $110,509 $106,276 $101,826 $97,148 $92,231 $87,062 $81,629 $75,918 $69,915 $63,605 $56,972 $49,999 $42,670 $34,966 $26,867 $18,354 $9,406 $0 Cost of Borrowing 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 6 Loan B Cost of Payoff Borrowing $152,008 8.41% $149,401 6.43% $146,674 5.77% $143,822 5.43% $140,839 5.24% $137,719 5.10% $134,456 5.01% $131,042 4.94% $127,472 4.89% $123,738 4.84% $119,833 4.81% $115,747 4.78% $111,475 4.75% $107,006 4.73% $102,331 4.71% $97,442 4.70% $92,329 4.68% $86,980 4.67% $81,386 4.66% $75,535 4.65% $69,415 4.64% $63,013 4.63% $56,318 4.62% $49,315 4.62% $41,990 4.61% $34,329 4.60% $26,316 4.60% $17,935 4.59% $9,169 4.59% $0 4.59% 8. Create a chart which compares the cost of borrowing under Loan A vs. Loan B against the year of repayment assumption. 9.00% 8.50% 8.00% 7.50% 7.00% 6.50% Loan B 6.00% Loan A 5.50% 5.00% 4.50% 4.00% 0 5 10 15 20 25 7 30 Actual, Part I: Amortization, Level-payment Mortgage Consider the following loan information. Property Price Loan Amount Down Payment Ending Balance $280,000 $275,000 $10,500 $0 LTV Interest rate Compounding Term 98.2% 6.0% (annual) Monthly 25 (in years) Property taxes Hazard insurance PMI Annual amounts $3,600 $1,800 $2,700 Also, assume that the loan includes discount points equal to 2% of the loan balance to be paid up-front at closing. Further, assume that there is a prepayment penalty equal to 1% of the outstanding balance at the time of prepayment. 1. What is the loan payment (a) principal and interest only, and (b) total payment (including property taxes, hazard insurance and PMI)? 2. Create an amortization spreadsheet which shows for every month of the loan: (1) the beginning balance, (2) the interest component of the mortgage payment, (3) the principal component of the mortgage payment, and (4) the mortgage loan balance at the end of the month. 3. What is the APR that would be reported for this loan? 4. What would be the cost of borrowing if you pay off the loan at the end of 3 years (end of month 36)? 5. Create three graphs to show (1) the interest component of the mortgage payment, (2) the principal component of the mortgage payment, and (3) the outstanding balance at the end of each month over the life of the loan. 8 Actual, Part II: Amortization, Adjustable-rate Mortgage 6. Create the amortization spreadsheet and answer the following questions for a $675,000 10-year adjustable-rate mortgage (ARM) loan that is fully-amortizing and has monthly payments. A teaser rate of 1.8% applies to the mortgage payments and amortization during the first 3 years of the loan. After the third year, the annual interest rate on the loan is equal to the going rate on an index + a margin of 2.5%, subject to an annual interest rate change cap of 1.5% and a lifetime interest rate change cap of 5% over the initial teaser rate. Expectations for the beginning-of-year values for the appropriate index are as follows: Year 3 4 5 6 7 8 9 10 Index 2.1% 4.7% 6.5% 1.5% 1.9% 5.1% 6.6% 6.0% a) Based on these expectations and conditions, what would be the actual interest rates applied to the mortgage payment during years 1 thru 10? b) What will be the outstanding balance at the end of year 4? c) Create an amortization spreadsheet which shows for every month of the loan: (1) the beginning balance, (2) the interest component of the mortgage payment, (3) the principal component of the mortgage payment, and (4) the mortgage loan balance at the end of the month. Actual, Part III: Loan Comparison Consider the following loan information. Months Loan amount Rate Points Prepay Loan A Loan B 180 180 $275,000 $275,000 6.10% 6.75% 3% 1% 2% 1% 7. Create a table in a separate spreadsheet than the one used for the analysis in Part I, which shows (a) the loan payoff amount at the end of each year (outstanding balance plus the prepayment penalty), and (b) the cost of borrowing, assuming that the loan is paid off at that point in time. 8. Create a chart which compares the cost of borrowing under Loan A vs. Loan B against the year of repayment assumption. 9 Property Price Loan Amount Down Payment Ending Balance LTV Interest rate Compounding Term Loan payment Taxes Insurance PMI Total payment Month 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 Beg balance Annual amounts Property taxes Hazard insurance PMI What if you sell after... ? Balance (Another way) + Prepay penalty Cost of borrowing (annual) (in years) (principal & interest only) Interest Principal Discount points Prepayment penalty APR End balance 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141 142 143 144 145 146 147 148 149 150 151 152 153 154 155 156 157 158 159 160 161 162 163 164 165 166 167 168 169 170 171 172 173 174 175 176 177 178 179 180 181 182 183 184 185 186 187 188 189 190 191 192 193 194 195 196 197 198 199 200 201 202 203 204 205 206 207 208 209 210 211 212 213 214 215 216 217 218 219 220 221 222 223 224 225 226 227 228 229 230 231 232 233 234 235 236 237 238 239 240 241 242 243 244 245 246 247 248 249 250 251 252 253 254 255 256 257 258 259 260 261 262 263 264 265 266 267 268 269 270 271 272 273 274 275 276 277 278 279 280 281 282 283 284 285 286 287 288 289 290 291 292 293 294 295 296 297 298 299 300 301 302 303 304 305 306 307 308 309 310 311 312 313 314 315 316 317 318 319 320 321 322 323 324 325 326 327 328 329 330 331 332 333 334 335 336 337 338 339 340 341 342 343 344 345 346 347 348 349 350 351 352 353 354 355 356 357 358 359 360 sell after... ? Term Amount 10 years $675,000 Month 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 Beg balance Payment Interest Principal End balance Year 1 2 3 4 5 6 7 8 9 10 Index 2.1% 4.7% 6.5% 1.5% 1.9% 5.1% 6.6% 6.0% 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 Index + margin Loan A Months Loan amount Rate Points Prepay Payment APR Loan B Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Payoff Loan A Cost of Borrowing Loan B Payoff Loan B Cost of Borrowing