Eight years ago, Jacqueline de Santos purchased a brand-new condominium at the Toronto Harbourfront for $180,000....
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Eight years ago, Jacqueline de Santos purchased a brand-new condominium at the Toronto Harbourfront for $180,000. Jacqueline had been saving for her first home purchase ever since she graduated from UTSC and she was able to make the 20% required down payment in order to avoid mortgage insurance. At the time, the mortgage rate on a 10-year fixed rate mortgage was 7.120% and the rate on a 25-year fixed rate mortgage was 9.240%. Jacqueline decided to take on a 25-year fixed rate mortgage. Today, Jacqueline works at RBC as a marketing manager. A couple of weeks ago during lunch, she was having a conversation with some of her colleagues at the mortgage department. Mortgage rates had fallen and she was advised to see whether she could refinance her mortgage in order to save some money. Normally, the penalty for refinancing a mortgage equals the amount of interest paid over the past three months. However, as an RBC employee, Jacqueline does not have to pay the penalty. One of her colleagues sent her the following information about current mortgage rates at RBC: 12/09/2013 RBC Personal Banking > Mortgages Mortgage Rates Mortgage Rates The charts below show current mortgage rates for fixed and variable rate mortgages, as well as the Royal Bank of Canada prime rate: Fixed Mortgage Rates (21) Term RBC Royal Bank Convertible 6 Month Closed 1 Year 2 Year 3 Year 4 Year 5 Year 7 Year Posted Rate 4.000% 3.140% 3.140% 3.950% 4.740% Mortgage Rates - RBC Royal Bank 5.340% 5.950% Special Offers (22) Call for details Call for details Call for details Call for details 3.590%(8) 3.890% (9) 4.190% (10) Questions: 1) Calculate Jacqueline's monthly mortgage payment prior to refinancing. 2) How much has Jacqueline paid towards her condominium over the past eight years? What fraction of that amount was due to interest payments? 3) When Jacqueline purchased the condominium, she opted for a 25-year mortgage. Had she decided to take on a 10-year mortgage with a rate of 7.120% instead, how much less (in $) would she have paid for interest over the past eight years? 4) If Jacqueline would have increased her mortgage payment calculated in question 1 by $50 a month since the start of the mortgage, what would the current mortgage balance be? 5) Under the assumption of question 4 regarding the monthly payment, calculate the number of years it would take Jacqueline (as of today) to pay off her existing mortgage. Demonstrate your answer with an amortization schedule. 6) Should Jacqueline follow her colleague's advice and refinance her mortgage for a 25-year fixed rate mortgage? Note: on the RBC snapshot, the relevant rates are posted rates for closed term (i.e., fixed term) mortgages. 7) What would you advise her to do if she would consider refinancing her mortgage using a 10-year fixed rate mortgage? Eight years ago, Jacqueline de Santos purchased a brand-new condominium at the Toronto Harbourfront for $180,000. Jacqueline had been saving for her first home purchase ever since she graduated from UTSC and she was able to make the 20% required down payment in order to avoid mortgage insurance. At the time, the mortgage rate on a 10-year fixed rate mortgage was 7.120% and the rate on a 25-year fixed rate mortgage was 9.240%. Jacqueline decided to take on a 25-year fixed rate mortgage. Today, Jacqueline works at RBC as a marketing manager. A couple of weeks ago during lunch, she was having a conversation with some of her colleagues at the mortgage department. Mortgage rates had fallen and she was advised to see whether she could refinance her mortgage in order to save some money. Normally, the penalty for refinancing a mortgage equals the amount of interest paid over the past three months. However, as an RBC employee, Jacqueline does not have to pay the penalty. One of her colleagues sent her the following information about current mortgage rates at RBC: 12/09/2013 RBC Personal Banking > Mortgages Mortgage Rates Mortgage Rates The charts below show current mortgage rates for fixed and variable rate mortgages, as well as the Royal Bank of Canada prime rate: Fixed Mortgage Rates (21) Term RBC Royal Bank Convertible 6 Month Closed 1 Year 2 Year 3 Year 4 Year 5 Year 7 Year Posted Rate 4.000% 3.140% 3.140% 3.950% 4.740% Mortgage Rates - RBC Royal Bank 5.340% 5.950% Special Offers (22) Call for details Call for details Call for details Call for details 3.590%(8) 3.890% (9) 4.190% (10) Questions: 1) Calculate Jacqueline's monthly mortgage payment prior to refinancing. 2) How much has Jacqueline paid towards her condominium over the past eight years? What fraction of that amount was due to interest payments? 3) When Jacqueline purchased the condominium, she opted for a 25-year mortgage. Had she decided to take on a 10-year mortgage with a rate of 7.120% instead, how much less (in $) would she have paid for interest over the past eight years? 4) If Jacqueline would have increased her mortgage payment calculated in question 1 by $50 a month since the start of the mortgage, what would the current mortgage balance be? 5) Under the assumption of question 4 regarding the monthly payment, calculate the number of years it would take Jacqueline (as of today) to pay off her existing mortgage. Demonstrate your answer with an amortization schedule. 6) Should Jacqueline follow her colleague's advice and refinance her mortgage for a 25-year fixed rate mortgage? Note: on the RBC snapshot, the relevant rates are posted rates for closed term (i.e., fixed term) mortgages. 7) What would you advise her to do if she would consider refinancing her mortgage using a 10-year fixed rate mortgage?
Expert Answer:
Answer rating: 100% (QA)
Here are the steps to solve this mortgage refinancing problem 1 Calculate Jacquelines monthly mortgage payment prior to refinancing Original mortgage amount 180000 Interest rate 9240 Term 25 years Usi... View the full answer
Related Book For
Posted Date:
Students also viewed these finance questions
-
List and describe the stepsLataneand Darley (1970) proposed that people employ when deciding to help in a bystander emergency situation .There are two key terms that describe ways that the presence...
-
The Crazy Eddie fraud may appear smaller and gentler than the massive billion-dollar frauds exposed in recent times, such as Bernie Madoffs Ponzi scheme, frauds in the subprime mortgage market, the...
-
Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...
-
Suppose the 2017 adidas financial statements contain the following selected data (in millions). Compute the following values and provide a brief interpretation of each. (a) Working capital. (b)...
-
A lair coin is tossed live times. What is the probability that there is not a sequence of three outcomes of the same kind?
-
Main Menu Contents Grades Course Contents ... HW1 two conducting balls L L q -X- (8c21p54) In the figure, two conducting balls of identical mass m = 15g and identical charge q hang from nonconducting...
-
Airlines have long used database technology to monitor capacity and maximize revenue by charging different prices to almost every passenger on a given flight. To what extent can other industries...
-
The statement of cash flows for Riker Company (prepared using the indirect method) follows. Consider the following additional information: (a) Sales for the year totaled $812,350. Cost of goods sold...
-
A company purchased factory equipment on June 1,2021 , for $151000. It is estimated that the equipment will have a $8200 salvage value at the end of its 10 -year useful life. Using the straight-line...
-
Consider the data in Table 3.30. and the following FDs: Decompose as necessary to achieve 3NF.
-
Question 3 6 Poi Explain the significance of the United States Supreme Court cases, Roper v. Simmons (2005) and Miller v. Alabama (2012). Next, explain how your own opinion of punishing juveniles...
-
How can modern computational techniques, such as molecular dynamics simulations, be used to predict phase behavior in complex mixtures, and how do these predictions inform industrial process design ?
-
Monroe Materials processes a purchased material, PM-20, and produces three outputs, Alpha, Beta, and Gamma. In February, the costs to process PM-20 are $604,000 for materials and $260,000 for...
-
4. Solve the equation. log, (8x-9)=log, (5+2x)
-
2. How many bits are required to address a 2K x 8 main memory if a) Main memory is byte-addressable? b) Main memory is word-addressable?
-
Hurst, Inc. sold its 8% bonds with a maturity value of $9,000,000 on August 1, 2019 for $8,838,000. At the time of the sale the bonds had 5 years until they reached maturity. Interest on the bonds is...
-
N = A block of mass m slides on a rough surface and moves toward a spring with a spring constant k = 3601 N/m, as shown in the figure below. When the block is d 17,3 m away from the spring, it has a...
-
Suppose that a business sells 6-month subscriptions to its monthly magazine. On January 1, the company receives a total of $600 for 10 subscriptions. To record this transaction, the company debits...
-
Solve the linear programming model formulated in Problem 13 for Irwin Mills by using the computer. a. If Irwin Mills can obtain additional cotton or processing time, but not both, which should it...
-
If the maximum operating capacity of Evergreen Fertilizer Company described in Problem 4 is 120,000 pounds of fertilizer per month, determine the break-even volume as a percentage of capacity.
-
Administrators at State University believe that decreases in the number of freshman applications that they have experienced are directly related to tuition increases. They have collected the...
-
Information from Razure Adventures Companys financial statements for the current year are provided in the Working Papers. Work independently to complete the following problem. 1. Calculate the...
-
Baycom Corporation's comparative income statement is provided in the Working Papers. Your instructor will guide you through the following examples. 1. Complete the partial income statement using...
-
Baycom Corporation's comparative balance sheet is provided in the Working Papers. Work independently to complete the following problem. 1. Complete the comparative balance sheet using trend analysis....
Study smarter with the SolutionInn App