Let us start off by calculating the interest earned over the four years of the mortgage:
A= Amount
P= the Principal
R= the rate
N= Number of years
A=P (1+R/100)^n
P= $100,000
R=12%
N=30 years
In order to find the interest charge we have to solve for A, so:
A=100,000(1+12/100)^30
A=100,000(1.12)^30
A=$2,995,992
Interest earned now can be found from getting the difference between the principal and amount.
I= A-P
I= 2995992-100000
I= $1,995,992
Now we take into account the new loan with a lower interest rate:
P= $100000
R= 10%
N= 25
A= 100,000(1+10/100)^25
A= 100,000(1.1)^25
A= $1,083,470
I= A-P
=1,083,470-100,000
=$983,470
Other than the lower interest rate, Three points and $2,000 dollars in closing costs have been charged to the new loan. One point equals one percent, therefore three points is three percent.
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You can clearly see this by the interest of both loans. Therefore, refinancing would be accruing more interest and would be working for him. His best interest would be to focus on selling or renting out the property to make a profit out of it.
On the flipside of things, if the investor planned on only five more years of owing the property, it would be in his best interest to refi because he wouldn’t pay that much interest within that time frame. Profits accumulated in the five years would be less compared to the duration of the loan and the interest wouldn’t have accrued so much to be even
AND AMORTIZATION 100% 16 CALCULATING INTEREST
For option 2 I calculated the savings I receive from reduced payment. For that I used difference between the mortgage payments as annuity payment for 180 months for Question A and for 60 months for Question B
After reading Chapter 6 of the textbook and the materials I found that I was struggling to understand the material more than usual. Before reading this chapter I had a slight idea of how much effort went into keeping track of the costs and inventory. The most that I knew was that you had to keep track of it, I didn’t know that there are different ways to keep track of those costs. After reading more into the different ways to keep track of inventory I found that the one that stuck out most to me and was the one that I spent the most time trying to understand was the LIFO (Last In First Out).
Therefore the annual interest rate is 8% and the effective annual rate compounded quarterly is 8.24%
2. If you had a payment that was due you in 5 years for $50,000 and you could earn a 5% rate of return, how much
Another way to look at it is by comparing how much money you would make if you had invested your money rather than using it to refinance your mortgage. Then compare that to what you would save if you had used your money for mortgage refinancing. Once you have those two numbers, you will also have a clear picture as to which route is best for you. Of course this is not an exact science, because there's no way you can predict how much you will make if you invest your money. However, you can use your best guess based on the current market and hope for the
Numerous individuals are persuaded that renegotiating is a misuse of cash, time, or both. Actually renegotiating a mortgage, if done effectively, can give astonishing investment funds, and advantages, for homeowners who realize what they are getting into. Likewise, the real procedure of renegotiating a home advance is much less demanding than individuals might suspect it is. It is fundamentally the same to buying another home. Homeowners just need to accumulate the best possible reports, and be arranged to answer some basic money related and general inquiries. Truth be told, while getting a renegotiating, homeowners will regularly have to a greater degree a decision in what mortgage loan specialist or bank they can work with. This can regularly prompt homeowners getting into another, advantageous, cash sparing, mortgage renegotiating, that even after the related expenses, will place them into a superior money related
Benefit from lower interest rates if the interest rates are reduced during the loan term
As markets shifted, Mr. Finch leveraged lender relationships formed in previous years, to plan and begin distressed real estate disposition. Michael was able to develop and grow these relationships to become an integral part of the acquisition and disposition team. Michael has developed and managed an extensive pipe line of lender owned assets, short sales, and portfolio note sales. Michael has continued to
Last year, our annual revenue was $2,000,000, with net income of $628,512 and CFAT of $646,461. We are looking to refinance the remaining loan balance of $818,523 and borrow an additional $250,000. The property’s cost
Every aspect is linked with good and bad both sides. The reverse mortgages will follow the same principle. Let us discuss its pros and cons so that you can procure the clearer idea about it, and go with the right flow.
Some investment firms are going beyond renegotiating the terms of the monthly mortgage payment — they are adjusting the principal in line with the home’s value, according to Fortune magazine. Selene Residential Mortgage Opportunity Fund of New York buys portfolios of high-risk loans at as little as 40 percent of what homeowners owe on the mortgage. The fund’s representatives work to lower the principal of homeowners who represent the best risk. One Chicago family had its monthly payment slashed by about half to $2,000 because their intention was to stay in the house, according to Fortune. This gave the family of 12 a mortgage that was more affordable on a $90,000 annual income.
Alan and I own a 5 acre historically listed property that has a very interesting history. Purchased in 2002 for $147,000. I paid a deposit of $75,000 upfront but Alan was unable to get finance so I co-signed a mortgage for the rest. The agreement was that I would not have anything to do with the restoration as Alan was the handyman and I am just not into that kind of thing. It all went well at first but after a while, Alan lost interest and now there are over 7 major jobs that Alan had started and not finished.
Thus the prepayment is caused by the difference between contract interest rate and refinancing rate.
Step 2. Locate the table value on the Amount of an Annuity table. The table value for 20 periods at 4% is 29.77808.