Question 1

A point is 1% of the amount of the loan.

Accepted Answer

A) True 
 B)False

Question 2

A variable rate mortgage means:

Accepted Answer

A)  The interest rate is not fixed 
B)  The interest rate is fixed for five years 
C)  The rate is not subject to change 
D)  Larger monthly payments than a fixed rate 
E)  None of these 
A)  The interest rate is not fixed 
B)  The interest rate is fixed for five years 
C)  The rate is not subject to change 
D)  Larger monthly payments than a fixed rate 
E)  None of these

Question 3

A larger down payment is needed for a 18-year fixed rate mortgage than for a 30-year fixed rate mortgage.

Accepted Answer

A) True 
 B)False

Question 4

Points represent:

Accepted Answer

A)  2% of the amount of the loan 
B)  Monthly payments 
C)  An additional cost of receiving the mortgage 
D)  3% up-front payment 
E)  None of these 
A)  2% of the amount of the loan 
B)  Monthly payments 
C)  An additional cost of receiving the mortgage 
D)  3% up-front payment 
E)  None of these

Question 5

The reduction of principal each month is equal to the payment minus the interest.

Accepted Answer

A) True 
 B)False

Question 6

The total of all monthly payments plus the amount of the mortgage equals the total cost of interest.

Accepted Answer

A) True 
 B)False

Question 7

Beverly Frost bought a home for $190,000 with a down payment of $19,000 at 7% for 25 years. Since then the rate has risen to 9%. How much more would her monthly payment be if she bought the house at 9%?

Accepted Answer

A)  $208.97 
B)  $436.40 
C)  $143.00 
D)  $226.44 
E)  None of these 
A)  $208.97 
B)  $436.40 
C)  $143.00 
D)  $226.44 
E)  None of these

Question 8

Graduated payments result in the borrower paying:

Accepted Answer

A)  More at the beginning of the mortgage 
B)  Less at the beginning of the mortgage 
C)  Less at the end of the mortgage 
D)  The mortgage at 1/2 the standard rate 
E)  None of these 
A)  More at the beginning of the mortgage 
B)  Less at the beginning of the mortgage 
C)  Less at the end of the mortgage 
D)  The mortgage at 1/2 the standard rate 
E)  None of these

Question 9

All mortgage payments must be paid:

Accepted Answer

A)  Weekly 
B)  Monthly 
C)  Biweekly 
D)  Semiannually 
E)  None of these 
A)  Weekly 
B)  Monthly 
C)  Biweekly 
D)  Semiannually 
E)  None of these

Question 10

The total cost of interest on a home purchased for $200,000 with 30% down at 7% for 35 years is $235,732.

Accepted Answer

A) True 
 B)False

Question 11

The monthly payment on a home purchased for $120,000 with 20% down at 8% for 25 years is $741.12.

Accepted Answer

A) True 
 B)False

Question 12

Subprime loans are very safe.

Accepted Answer

A) True 
 B)False

Question 13

Stu Reese has a $150,000 7 ½% mortgage. His monthly payment is $1,010.10. His first payment will reduce the principal to an outstanding balance of:

Accepted Answer

A)  $149,729.40 
B)  $149,927.40 
C)  $72.60 
D)  $149,910.40 
E)  None of these 
A)  $149,729.40 
B)  $149,927.40 
C)  $72.60 
D)  $149,910.40 
E)  None of these

Question 14

Abby's monthly payment is $781.60 per month. The principal is $80,000 at a rate of 11 1/2% for 35 years. The principal reduction after the first mortgage payment is $14.93.

Accepted Answer

A) True 
 B)False

Question 15

A biweekly mortgage results in six extra payments per year.

Accepted Answer

A) True 
 B)False

Question 16

Interest rates on mortgages do not vary from bank to bank.

Accepted Answer

A) True 
 B)False

Question 17

Chin Woo bought a home for $160,000. He put down 20%. The mortgage is at 8 1/2% for 25 years. Using the formula or financial calculator, his yearly payments are:

Accepted Answer

A)  $1,238.00 
B)  $12,507.10 
C)  $12,830.61 
D)  $12,380.61 
E)  None of these 
A)  $1,238.00 
B)  $12,507.10 
C)  $12,830.61 
D)  $12,380.61 
E)  None of these

Question 18

Megan Mei is charged 2 points on a $120,000 loan at the time of closing. The original price of the home before the down payment was $140,000. The points in dollars cost Megan:

Accepted Answer

A)  $2,400 
B)  $2,800 
C)  $4,200 
D)  $8,200 
E)  None of these 
A)  $2,400 
B)  $2,800 
C)  $4,200 
D)  $8,200 
E)  None of these

Question 19

Craig Hammer purchased a new condominium for $225,000. The bank required a $30,000 down payment. Assuming a rate of 8% on a 25-year mortgage, Craig's monthly payment is:

Accepted Answer

A)  $1,431.30 
B)  $1,413.30 
C)  $1,505.04 
D)  $1,505.40 
E)  None of these 
A)  $1,431.30 
B)  $1,413.30 
C)  $1,505.04 
D)  $1,505.40 
E)  None of these

Question 20

All mortgages must be paid monthly.

Accepted Answer

A) True 
 B)False

Exam 18: The Cost of Home Ownership

A point is 1% of the amount of the loan.

A variable rate mortgage means:

A larger down payment is needed for a 18-year fixed rate mortgage than for a 30-year fixed rate mortgage.

Points represent:

The reduction of principal each month is equal to the payment minus the interest.

The total of all monthly payments plus the amount of the mortgage equals the total cost of interest.

Beverly Frost bought a home for $190,000 with a down payment of $19,000 at 7% for 25 years. Since then the rate has risen to 9%. How much more would her monthly payment be if she bought the house at 9%?

Graduated payments result in the borrower paying:

All mortgage payments must be paid:

The total cost of interest on a home purchased for $200,000 with 30% down at 7% for 35 years is $235,732.

The monthly payment on a home purchased for $120,000 with 20% down at 8% for 25 years is $741.12.

Subprime loans are very safe.

Stu Reese has a $150,000 7 ½% mortgage. His monthly payment is $1,010.10. His first payment will reduce the principal to an outstanding balance of:

Abby's monthly payment is $781.60 per month. The principal is $80,000 at a rate of 11 1/2% for 35 years. The principal reduction after the first mortgage payment is $14.93.

A biweekly mortgage results in six extra payments per year.

Interest rates on mortgages do not vary from bank to bank.

Chin Woo bought a home for $160,000. He put down 20%. The mortgage is at 8 1/2% for 25 years. Using the formula or financial calculator, his yearly payments are:

Megan Mei is charged 2 points on a $120,000 loan at the time of closing. The original price of the home before the down payment was $140,000. The points in dollars cost Megan:

Craig Hammer purchased a new condominium for $225,000. The bank required a $30,000 down payment. Assuming a rate of 8% on a 25-year mortgage, Craig's monthly payment is:

All mortgages must be paid monthly.

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