What will be the interest tax deduction for next year

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Reference no: EM131935648

Question: You have asked the bank for a $300,000 mortgage at the beginning of this year (January 1 of this year). They have agreed to give you this mortgage at 8% annual interest payable monthly, but with an origination fee of 0.5% and 1 mortgage discount point. What this means is that you only get $295,500.00 ($300,000 minus 1.5%). Further, suppose that you have to pay the mortgage back in 3 years and your first payment is due after one month.

What is the monthly payment?

a. $8,253.83

b. $7,834.09

c. $6,534.20

d. $9,400.91

What is the effective cost of mortgage?

a. 9.41%

b. 8.53%

c. 10.27%

d. 11.11%

If you pay the mortgage according to the loan agreement, how much total interest will you pay ignoring origination fee and mortgage discount point and assume that the loan amount is $300,000?

a. $35,209.35

b. $29,046.29

c. $42,325.42

d. $38,432.75 \

You can deduct the total interest paid for tax purposes. What will be the interest tax deduction for next year?

a. $13,683.35

b. $14,339.82

c. $10,295.61

d. $14,256.57

Reference no: EM131935648

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