Rachel and Tom Baker are your friends with whom you have attended the same Bible study...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Rachel and Tom Baker are your friends with whom you have attended the same Bible study for several years. You are a mortgage originator for the XYZ Mortgage Brokerage, Inc., and the Bakers have come to you for advice concerning the possibility of refinancing their existing mortgage. Their current 30-year, fixed rate mortgage was originally issued for $300,000 at a rate of 6.000%. They have owned their home for 15 years and their current mortgage balance is $213,150. You have identified the following mortgage options for the Bakers: 1.30-Year Fixed Rate; 5.125%; $1,000 cash required at closing 2. 15-Year Fixed Rate; 4.500%; $5,000 cash required at closing 3.5/1 ARM; 4.375% (2 % cap per year; 10% life): $4,500 cash required at closing The owner of XYZ has been particularly vocal about the need to maximize profits for the firm given the continued lag in the real estate market. Your firm stands to collect the following fees (including fees paid by the mortgage lender directly to your company) associated with each of the mortgage options, as follows: 1.30-Year Fixed Rate - $4,000 2. 15-Year Fixed Rate - $3,750 3.5/1 ARM - $4,250 As a principled professional, you are guided by your desire to provide the excellent service to your customers but, of course, you must also make money for your employer and for yourself (your salary is 100% commission-based). In reviewing the Bakers' financial situation, you find that their credit ratings are very high and that they are well qualified to refinance their mortgage at the most favorable rates available. Please 1.Research and write a recommendation for the Bakers. 2.What advice will you give to the Bakers concerning their interest in refinancing their existing mortgage? Explain your recommendation. 3.Evaluate the risk-return trade-off for each option and justify your advice with financial calculations and logical and ethical considerations. Rachel and Tom Baker are your friends with whom you have attended the same Bible study for several years. You are a mortgage originator for the XYZ Mortgage Brokerage, Inc., and the Bakers have come to you for advice concerning the possibility of refinancing their existing mortgage. Their current 30-year, fixed rate mortgage was originally issued for $300,000 at a rate of 6.000%. They have owned their home for 15 years and their current mortgage balance is $213,150. You have identified the following mortgage options for the Bakers: 1.30-Year Fixed Rate; 5.125%; $1,000 cash required at closing 2. 15-Year Fixed Rate; 4.500%; $5,000 cash required at closing 3.5/1 ARM; 4.375% (2 % cap per year; 10% life): $4,500 cash required at closing The owner of XYZ has been particularly vocal about the need to maximize profits for the firm given the continued lag in the real estate market. Your firm stands to collect the following fees (including fees paid by the mortgage lender directly to your company) associated with each of the mortgage options, as follows: 1.30-Year Fixed Rate - $4,000 2. 15-Year Fixed Rate - $3,750 3.5/1 ARM - $4,250 As a principled professional, you are guided by your desire to provide the excellent service to your customers but, of course, you must also make money for your employer and for yourself (your salary is 100% commission-based). In reviewing the Bakers' financial situation, you find that their credit ratings are very high and that they are well qualified to refinance their mortgage at the most favorable rates available. Please 1.Research and write a recommendation for the Bakers. 2.What advice will you give to the Bakers concerning their interest in refinancing their existing mortgage? Explain your recommendation. 3.Evaluate the risk-return trade-off for each option and justify your advice with financial calculations and logical and ethical considerations.
Expert Answer:
Answer rating: 100% (QA)
Solution 1After researching the mortgage options available to the Bakers I recommend that they refinance their mortgage with the 30year fixed rate option This option will provide them with a low inter... View the full answer
Related Book For
Systems analysis and design
ISBN: 978-0136089162
8th Edition
Authors: kenneth e. kendall, julie e. kendall
Posted Date:
Students also viewed these general management questions
-
The crisis in the real estate market caused the listing prices of homes in areas such as Orlando, Florida, to fall from previous years. A real estate office would like to sample 50 new listings...
-
The mother of a rape victim, with whom you have been working, calls and says that ever since the rape, her daughter has been crying and unable to eat or sleep. She tells you it is urgent that she...
-
A joint venture has been underway for several years to develop a membrane process to separate CO 2 and H 2 S from high-pressure, sour natural gas. Typical feed and product conditions are: To meet...
-
1. What is Anthropology, Sociology, and Political Science in your own understanding? 2. What is the nature of Anthropology, Sociology, and Political Science? 3. How are they similar with one another?
-
Is it possible to climb a ladder placed against a wall where the ground is frictionless but the wall is not? Explain.
-
1. Are Sears and Kmart exploiting disadvantaged consumers? Explain why or why not. 2. Low-income consumers often don't have bank accounts and credit cards. Describe how some financial institutions...
-
What decision-making traps and issues are common?
-
Using OLAP Query 1 shown in Figure 9.11 (based on data from Figure 9.7) as a starting point, give an example that illustrates a pivot operation.
-
*#6.) Determine the vertex and axis of symmetry o the graphed quadratic: 04- ertex: Axis of Symmetry:
-
The spool has a mass of 30 kg and a radius of gyration k o = 0.25 m. Block A has a mass of 25 kg, and block B has a mass of 10 kg. If they are released from rest, determine the time required for...
-
Burger Master bought the food concession for a baseball stadium for five years at a price of $1.2 million. If the operating profit is $400,000 per year, what IRR will Burger Master realize on its...
-
What is a model?
-
Boundaries for an OE are relative to what frame of reference?
-
What are examples of Induced Environment threats and their sources?
-
What are examples of Natural Systems Environment threats and their sources?
-
What are examples of Human Systems Environment threats and their sources?
-
MilltownCompany sells used cars. During the month, the dealership sold 18cars at an average price of $20,000 each. The budget for the monthwas to sell 15 cars at an average price of $20,900. Comput...
-
The unadjusted trial balance of Secretarial Services is as follows: SECRETARIAL SERVICES Unadjusted Trial Balance as at 31 December 2017 Account Debit Credit Cash at bank Office supplies Prepaid...
-
Define denormalization.
-
Define what is meant by doing a structured walkthrough. Who should be involved? When should structured walkthroughs be done?
-
The dArcy James cosmetics firm requires its salespeople to use notebooks to enter orders from retail department stores (their biggest customers). This information is then relayed to warehouses, and...
-
Juan Garcia, a newly minted MBA of a prestigious East Coast U.S. university, has been assigned to the treasury department at Cemex as part of his management training program's rotation. He has now...
-
Josh Miller is chief financial officer of a medium-sized Seattle-based medical device manufacturer. The company's annual sales of \(\$ 40\) million have been growing rapidly, and working capital...
-
Instruments du Rhone, S.A., as described in this chapter, decides not to change its domestic sales price of \( 12.80\) per unit within Europe but to raise its export price (in euros) from \( 12.80\)...
Study smarter with the SolutionInn App