X + -80 Quizzes for m Fall 2020 EC580-74... Suppose you have just purchased your first home for $300,000. At the time of purchase you could only afford to commit to a down payment of $20,000. In order to make the loan, the lender requires you to obtain private mortgage insurance (PMI) on their behalf. Suppose over time you paid down the principal of the loan to $255,000 and at that point time you can no longer make any mortgage payments (i.e., you default on the loan). If the lender were to foreclose on your property and sell it for $228,000, answer: of 2.00 estion 1) What would the lender's loss of principal be without the protection of mortgage insurance? $ 2) what would the lender's loss of principal be taking into consideration the protection of mortgage insurance? (Let's assume that the PMI in this case covers the top 30% of the loan.) $ 2 ut of 4.00 Suppose you have an existing mortgage loan with a remaining balance $200,000 and a remaining term of 15 years, and the interest rate on the old mortgage is 5.25%. You have found another lender who will refinance the current outstanding loan balance at 3.50% with monthly payments. The new lender will charge a refinancing costs of 8% of the outstanding loan amount. There are no prepayment penalties associated with either loan. You feel the appropriate opportunity cost to apply to this refinancing decision is the interest rate on the new loan: 3.50%. Answer the following questions: question 1), What is the monthly payment on the old loan? $ - 2), What would be the monthly payment on the new loan? $ 3). What would be the net benefit if you chose to refinance today? 4), What would be the NPV if you chose to refinance today? 4 FS F6 EZ II F9 F10 F11 F12 % 5 & 7 * 00 6 ) 0 9 + 11 = delete T Y U O X + -80 Quizzes for m Fall 2020 EC580-74... Suppose you have just purchased your first home for $300,000. At the time of purchase you could only afford to commit to a down payment of $20,000. In order to make the loan, the lender requires you to obtain private mortgage insurance (PMI) on their behalf. Suppose over time you paid down the principal of the loan to $255,000 and at that point time you can no longer make any mortgage payments (i.e., you default on the loan). If the lender were to foreclose on your property and sell it for $228,000, answer: of 2.00 estion 1) What would the lender's loss of principal be without the protection of mortgage insurance? $ 2) what would the lender's loss of principal be taking into consideration the protection of mortgage insurance? (Let's assume that the PMI in this case covers the top 30% of the loan.) $ 2 ut of 4.00 Suppose you have an existing mortgage loan with a remaining balance $200,000 and a remaining term of 15 years, and the interest rate on the old mortgage is 5.25%. You have found another lender who will refinance the current outstanding loan balance at 3.50% with monthly payments. The new lender will charge a refinancing costs of 8% of the outstanding loan amount. There are no prepayment penalties associated with either loan. You feel the appropriate opportunity cost to apply to this refinancing decision is the interest rate on the new loan: 3.50%. Answer the following questions: question 1), What is the monthly payment on the old loan? $ - 2), What would be the monthly payment on the new loan? $ 3). What would be the net benefit if you chose to refinance today? 4), What would be the NPV if you chose to refinance today? 4 FS F6 EZ II F9 F10 F11 F12 % 5 & 7 * 00 6 ) 0 9 + 11 = delete T Y U O