RES 3200 HW
Zicklin School of Business Baruch College Homework #4 RES 3200 1. The information provided here applies to questions 1, 2, 3, 4, 5 and 6. Two years ago, you borrowed $485,000 using a 30-year ...xed payment mortgage oering a 5% interest rate. Current mortgage rates are now 4.625%. If you pay o your existing mortgage by taking out a new 28-year YOURgage at the current rate, what is the amount saved each month in terms of the dierence in monthly payments? 2. If the new loan requires that you pay 1.5 points and an additional $1,000 in closing costs, what is the total amount of money that you will need to pay at closing in order to re...nance your loan? 3. If you hold the new loan until its maturity, what is the return that you expect to receive by re...nancing? 4. If you are currently earning a 10% return on your investments, you should de...nitely re...nance. (a) True. (b) False. 5. Suppose whether you decide to re...nance or not, that you expect to pay o your mortgage in six years. What is the return that you expect to receive by re...nancing under this scenario? 6. Suppose you are currently earning a 10% return on your investments on your long term investments. Based on the information provided in the previous question, you should re...nance. (a) True. (b) False. 7. You are about to purchase an apartment for $1.5 million. With your upcoming bonus, you will be able to make a down payment of $500,000. Given your good credit history, the rest you will borrow in the form of a... (a) conventional loan. (b) jumbo loan. (c) sub-prime loan. (d) too-legit-to-quit loan. 8. You are going to meet with a mortgage broker about obtaining a mortgage. If your credit score is 590, you will most likely borrow the funds using a... (a) conventional loan. (b) jumbo loan. (c) sub-prime loan. (d) a too-big-to-fail loan. 1 9. You have a credit score of 740 and, after making a down payment equal to 20% of the purchase price, need to borrow $375,000 to purchase a studio apartment in Williamsburg. You will most likely borrow this amount in the form of a... (a) conventional loan. (b) jumbo loan. (c) sub-prime loan. (d) smarter-than-your-average-bear loan. 10. The underwriting process for a residential loan is based on all of the following, except... (a) the number of years the buyer is expected to live at the property. (b) an appraisal of the property' market value. s (c) the borrower' credit history. s (d) the documentation of income and assets required in the loan application. 11. The information presented here applies to questions 11 and 12. Four years ago, you borrowed $265,000 using a 15-year ...xed-payment mortgage with a 6% interest rate. If the today' mortgage rate is 4%, what is the market value of the remaining schedule s payments? 12. If today' mortgage rate is 7%, what is the current market value of your loan? s 2
