I bought a house that was appraised at $425,000 on January 1, 2000. I got an 80% mortgage as a fi xed 30 - year mortgage at 5.00%. On January 1, 2007, I decided to take a second mortgage because I need some cash. I fi nd that my house has appreciated 3% a year. My lender will give me a second mortgage for the difference between 80% of the appraised value and my equity. The second mortgage is at 6.2%. The second mortgage will be fully paid off at the same time that the fi rst mortgage is paid off.

What is the principal of the second mortgage and what are my total monthly payments

(fi rst + second mortgages combined)? Assume 0 up - front costs for both mortgages.

Fixed interest, fi xed payment mortgage loans are no different from the basic loans described in Chapter 3 . The problems below will, therefore, concentrate on variations in calculation brought about by different types of mortgage loans. Solving these problems, on the other hand, will require a working ability to solve the simpler problems.