Discussed the pro and cons of adjustable rate mortgages

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Jacob Is Fixing Up A House And Asking For $124,500, He Feels Confident That The Work Can Be ... Your question has been answered Let us know if you got a helpful answer. Rate this answer Question: Jacob is fixing up a house and asking for $124,500, he feels confident that the work can be compl... Jacob is fixing up a house and asking for $124,500, he feels confident that the work can be completed for $12,000. With that number included he decided the total cost of the house would be $140,000 or less.

1) By putting 20% down on the house, Jacob can get a 30-year fixed-rate mortgage for 4.25% Based on a purchase price of $140,000, compute the down payment, and the principal and interest payment for the loan.

2) Jacob finds a lender that will offer him 100% financing using an adjustable rate mortgage based on a 30-year amortization, with a 3-year interest lock at 5.0%. Compute the monthly payment for principal and interest on the loan for the first 3 years.

3) After 3 years the economy has boomed, inflation has increased and the new adjusted interest rate is 10%. Compute the new monthly payment for principal and interest on the loan.

4) Briefly discussed the pro and cons of adjustable rate mortgages. Are there circumstances when you think it is a good idea to chose an adjustable rate mortgages?

5) Assume that the interest rate stays at 10% for the remaining 27 years, calculate the total interest that will be paid over the entire 30-year life of the adjustable rate mortgage. State any conclusions that you can draw about adjustable rate mortgages.

Reference no: EM131899667

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