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I am confused about this one…

Consider a mortgage for $ 100,000. There are two options – a 15-year term with an interest rate of 6.0% and a 30-year term with an interest rate of 5.75%.

a) What is the monthly payment for each option (rounded to the nearest dollar)?
b) What is the total payout for each option?
c) Which option would you choose, and why?

Any help with this one would be appreciated!

2 Thoughts on Question about Interest and Mortgage – need help!?
  1. Reply
    Smiling
    February 6, 2014 at 5:22 am

    a. go to Y!A mortgage calculator to find out the correct answer.
    – FYI = it it’s for the same person, the 15y loan will always have a lower interest rate than the 30y.

    b. there is no way for us to know. There are other things involved such as mortgage broker fees and points.

    c. It depends. The 15y loan will be higher on a monthly basis. Can the person afford the higher payment, is there a reason they want to pay it off early. Is this an investment or a “home”?, etc.

  2. Reply
    Karen
    February 6, 2014 at 5:34 am

    you would also need to know how much you were putting in as a down payment. If you don’t have 20% there is a PMI fee. It is always best if you can afford the payments to take out the 15 year.Less interest and the last 15 years your not paying on your house your paying yourself by putting that house payment amount into a good mutual fund and setting yourself up for a nice retirement amount.

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