Standard mortgage regulations

Assignment Help Financial Management
Reference no: EM13849707

1. After saving for the past few years, Sharon now has enough for the down payment on her house. Her dream house costs $256,000 and her down payment will be equal to 25% of this amount. After discussions with her bank she has decided to obtain a mortgage with a 20 year amortization period and a fixed rate of 5.2%. All the standard mortgage regulations apply.

a) What are Sharon’s monthly mortgage payments?

b) It is now three years from the date of Sharon’s purchase and mortgage rates have fallen significantly. She is thinking of refinancing her mortgage at a new lower rate of 3.5%. If she proceeds with the refinancing, the bank will charge her a penalty of $2500.

i) What is the current value of Sharon’s original mortgage? In other words, how much does she still owe the bank after 3 years?

ii) Calculate the PV of the savings Sharon would achieve from the re-financing. Should she proceed to refinance her house?

Hint: First, calculate the new monthly payments. Then calculate the savings. Compare the PV of savings over the remaining life of the mortgage with the penalty of 2500

Reference no: EM13849707

Questions Cloud

Briefly discuss how utilitarianism would look : briefly discuss how Utilitarianism would look
Values for single cash flow : Find the following values for a single cash flow:
Art sound systems targeted at young professional market : HRM manufactures state of the art sound systems targeted at the young professional market. Analysts following HRM Corporation predict that the company’s earnings and dividends will continue to grow at 14 percent for the next period. What is the value..
Discuss the pros of using lower power storage density : Discuss the pro's and con's of using lower power storage density with significant on-orbit heritage vs. batteries with higher power storage density but with less flight heritage.
Standard mortgage regulations : After saving for the past few years, Sharon now has enough for the down payment on her house. Her dream house costs $256,000 and her down payment will be equal to 25% of this amount. What are Sharon’s monthly mortgage payments? It is now three years ..
What is organizational culture? : What is organizational culture?
Issuing zero-coupon bond-using the semiannual convention : Delagold Corporation is issuing a zero-coupon bond that will have a maturity of fifty years. The bond's par value is $1,000, and the current yield on similar bonds is 7.5%. What is the expected price of this bond, using the semiannual convention?
What is the price of each stock-expected capital gains yield : You will analyze three different stocks, all of which have a required return of 10% and a most recent dividend of $4.50 per share. Stocks A, B, and C are expected to maintain constant growth rates in dividends for the foreseeable future of 6%, 0%, an..

Reviews

Write a Review

Financial Management Questions & Answers

  Foreign company acquisition

Acquisition by a foreign company and the effects of that decision and the results of foreign exchange in Euro and the exchange rate differences.

  Financial management for profit and non profit organizations

In this essay, we are going to discuss the issues of financial management in a non-profit organisation.

  Method for estimating a venture''s value

Evaluate venture's present value, cash and surplus cash and basic venture capital.

  Replacement analysis

This document show the Replacement Analysis of modling machine. Is replacement give profit to company or not?

  Business finance task - capital budgeting

Your company is considering using the payback period for capital-budgeting. Discuss the advantages and disadvantages of this technique.

  Analysis of the investment

In this project, you will focus on one of these: the additional cost resulting from the purchase of an apple press (a piece of equipment required to manufacture apple juice).

  Conduct a what-if analysis

Review the readings and media for this unit, including the Anthony's Orchard case study media. Familiarise yourself with the Anthony's Orchard company and its current situation.

  Determine operational expenditures

Organisations' behaviour is guided by financial data. In the short term, such data will help determine operational expenditures; in the long term, historical data may help generate forecasts aimed at determining strategic plans. In both instances.

  Personal financial management

How much will you have left over each half year if you adopt the latter course of action?

  Sources of finance for expansion into new foreign markets

A quoted company is considering several long-term sources of finance for expansion into new foreign markets.

  Long term financial planning

This assignment is designed for analyze Long term financial planning begins with the sales forecast and the key input in the long term fincial planning.

  Explain the role of fincial manager

This assignment explain the role of fincial manager, function of manger. And what are the motives of financial manager.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd