1. Exactly 10 years ago, a 30-year fully amortizing loan was made for $170,000 at 6.6% interest, with payments made end of every month. Today the borrower paid $10,000 towards the principal.

1. Assume that the bank agrees for reduced monthly payments into the remaining term. What is the new mortgage amount?
2. Assume that the bank does not agree for the reduced monthly term. What is the new maturity?

2. You have two competing loans towards choosing mortgage for $200,000. Both the loans are fully amortizing loans. Alternative A is a 30-year loan at 6.6% with 5 points included in closing costs. Alternative B is a 30-year loan at 7.2% with 2 points included in closing costs. Also, Loan A has a 2% pre-payment penalty if closed in less than 10 years, and Loan B has a 3% pre-payment penalty if closed in less than 15 years.

1. Which alternative is better assuming you plan to stay with the loan for 30 years? Why?
2. Which alternative is better assuming you plan to stay with the loan for 12 years? Why?
3. Which alternative is better assuming you plan to stay with the loan for 4 years? Why?

3. Exactly 15 years ago, you borrowed $300,000 to buy a home. The loan is a 30-year fully amortizing loan with end-of-month payments, set at 9% rate. Counting from the date of loan origination, at the end of years 3, 5, 8 and 10, you made contribution towards principal of $6,000, $10,000, $8,000 and $4,000 respectively. Setup an amortization table (shown by month) to capture this situation. Use excel to do this and attach the excel output.

1. What is the new maturity (in months)?
2. What is the total interest paid? If you had not made any contribution to the principal, what would have been the interest?

4. Consider a situation where you are borrowing $500,000 (mortgage loan for commercial property). The loan term is 10 year with an interest rate of 8% per year compounded quarterly. Payments will occur end of every quarter.

Create amortization table for each of the following situations, using Excel. Make sure you print it on one page for each properly condensed. (Tip: From Excel copy as a picture and paste to a word. Now you can size it by grabbing the corners of the picture)

1. The payment is interest only.
2. The payment is a Constant Payment Fully Amortizing Loan.
3. The payment is variable, but the periodic amortization is constant. The loan is fully amortizing type.
4. The payment is constant at $12,000. Comment on what kind of loan is this?