Question 1

While a variety of loan terms are available in a lender's mortgage menu,the most common loan term on a level-payment mortgage is:

Accepted Answer

A) 7 years 
B) 15 years 
C) 30 years 
D) 40 years

Question 2

Given the following information,calculate the balloon payment for a partially amortized mortgage.Loan amount: $84,000,Term to maturity: 7 years,Amortization Term: 30 years,Interest rate: 4.5%,Monthly Payment: $425.62.

Accepted Answer

A) $9,458 
B) $30,620 
C) $73,102 
D) $84,000

Question 3

You have taken out a $225,000,3/1 ARM.The initial rate of 5.8% (annual)is locked in for 3 years and is expected to increase to 6.5% at the end of the lock period.Calculate the initial payment on the loan.(Note: the term on this 3/1 ARM is 30 years)

Accepted Answer

A) $1,320.19 
B) $1,422.15 
C) $1,874.45 
D) $1959.99

Question 4

When fully amortizing loans call for equal periodic payments over the life of the loan they are known as:

Accepted Answer

A) level-payment mortgages 
B) adjustable-rate mortgages 
C) interest-only mortgages 
D) early-payment mortgages

Question 5

When lenders charge discount points (prepaid interest)on a loan,what impact does this have on the loan's yield?

Accepted Answer

A) The yield on the loan will increase. 
B) The yield on the loan will decrease. 
C) The yield on the loan will be unaffected. 
D) The yield on the loan automatically becomes zero.

Question 6

Given the following information,calculate the Effective Borrowing Cost (EBC).Loan amount: $175,000,Term: 30 years,Interest rate: 7 %,Payment: $1,164.28,Discount points: 1,Origination fee: $3,250.Assume the loan is held until the end of year 10.

Accepted Answer

A) 0.6% 
B) 3.8% 
C) 7.0% 
D) 7.4%

Question 7

Recently,15-year mortgages have increased in popularity amongst both borrowers and lenders.Which of the following groups of borrowers would typically be the least interested in
A 15-year mortgage?

Accepted Answer

A) Mature households with minimal financial constraints 
B) First-time homebuyers 
C) Homeowners who are refinancing to obtain a lower rate than is available on a comparable 30-year mortgage 
D) Homeowners who are interested in selling their property within five years

Question 8

Assume you have taken out a partially amortizing loan for $325,000 that has a term of 7 years,but amortizes over 30 years.Calculate the balloon payment at maturity (Year 7)if the interest rate on this loan is 4.5%.

Accepted Answer

A) $1,646.73 
B) $118,468.21 
C) $282,835.42 
D) $324,572.02

Question 9

The APR can be a controversial measure of borrowing cost because it tends to:

Accepted Answer

A) overstate the true borrowing cost by assuming we hold mortgage until maturity 
B) understate the true borrowing cost by assuming we hold mortgage until maturity 
C) overstate the true borrowing cost by assuming we do not hold mortgage until maturity 
D) understate the true borrowing cost by assuming we do not hold mortgage until maturity

Question 10

In considering a 3/1 adjustable-rate mortgage (ARM),the interest rate will be fixed for how many years?

Accepted Answer

A) One year 
B) Two years 
C) Three years 
D) Four years

Exam 15: Mortgage Calculations and Decisions

While a variety of loan terms are available in a lender's mortgage menu,the most common loan term on a level-payment mortgage is:

Given the following information,calculate the balloon payment for a partially amortized mortgage.Loan amount: $84,000,Term to maturity: 7 years,Amortization Term: 30 years,Interest rate: 4.5%,Monthly Payment: $425.62.

You have taken out a $225,000,3/1 ARM.The initial rate of 5.8% (annual) is locked in for 3 years and is expected to increase to 6.5% at the end of the lock period.Calculate the initial payment on the loan.(Note: the term on this 3/1 ARM is 30 years)

When fully amortizing loans call for equal periodic payments over the life of the loan they are known as:

When lenders charge discount points (prepaid interest) on a loan,what impact does this have on the loan's yield?

Given the following information,calculate the Effective Borrowing Cost (EBC) .Loan amount: $175,000,Term: 30 years,Interest rate: 7 %,Payment: $1,164.28,Discount points: 1,Origination fee: $3,250.Assume the loan is held until the end of year 10.

Recently,15-year mortgages have increased in popularity amongst both borrowers and lenders.Which of the following groups of borrowers would typically be the least interested in A 15-year mortgage?

Assume you have taken out a partially amortizing loan for $325,000 that has a term of 7 years,but amortizes over 30 years.Calculate the balloon payment at maturity (Year 7) if the interest rate on this loan is 4.5%.

The APR can be a controversial measure of borrowing cost because it tends to:

In considering a 3/1 adjustable-rate mortgage (ARM) ,the interest rate will be fixed for how many years?