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# you have a \$112,000 adjustable rate mortgage that was 8% per year. you were just notified that next year it is going up to 13%. what is the annual dollar difference between the old and newly adjusted interest rates if your balance stayed the same at \$112,000?

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### James

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get you have a \$112,000 adjustable rate mortgage that was 8% per year. you were just notified that next year it is going up to 13%. what is the annual dollar difference between the old and newly adjusted interest rates if your balance stayed the same at \$112,000? from EN Bilgi.

## QUESTION 3 of 10: You have a \$112,000 adjustable r

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## QUESTION 3 of 10: You have a \$112,000 adjustable rate mortgage that was 8% per year. You were just notified that next year it is going up to13%. What is the annual dollar difference between the old and newly adjusted interest rates if your balance stayed the same at \$112,000?a \$1,120b \$1,253c \$5,600d \$8,960

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QUESTION 3 of 10: You have a \$112,000 adjustable rate mortgage that was 8% per year. You were just notified that next year it is going up to

13%. What is the annual dollar difference between the old and newly adjusted interest rates if your balance stayed the same at \$112,000?

a) \$1,120 b) \$1,253 c) \$5,600 d) \$8,960 Good Question (216) Answer 4.6 (372) votes Write neatly (95) Correct answer (61)

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Start studying Business Mathematics - Chapter 15. Learn vocabulary, terms, and more with flashcards, games, and other study tools.

## Business Mathematics - Chapter 15

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Order the steps to calculate interest, principal, and the new balance of monthly payments.

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1. Calculate the interest for a month (use current principal)

Interest = Principal x Rate x Time

2. Calculate the amount used to reduce the principal:

Principal Reduction = Monthly payment - interest

3. Calculate the new principal:

Current Principal - reduction of principal = new principal

Click again to see term 👆

over time the amount applied to ______ decreases and the amount applied to the _____ increases.

Click card to see definition 👆

Interest, Principal

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### Textbook solutions for this set

Principles of Microeconomics

7th Edition N. Gregory Mankiw 508 explanations

Principles of Microeconomics

8th Edition N. Gregory Mankiw 502 explanations

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### Terms in this set (38)

Order the steps to calculate interest, principal, and the new balance of monthly payments.

1. Calculate the interest for a month (use current principal)

Interest = Principal x Rate x Time

2. Calculate the amount used to reduce the principal:

Principal Reduction = Monthly payment - interest

3. Calculate the new principal:

Current Principal - reduction of principal = new principal

over time the amount applied to ______ decreases and the amount applied to the _____ increases.

Interest, Principal

Drew purchases a \$144,000 home on a 30 year fixed rate mortgage at 7.5%. Match the following values to the terms:

Table Factor: 7.00

N = 30-year term, I = 7.5%; TF = 7

Term of loan in years: 30

Monthly payment: \$1,008

Dividing the mortgage amount by \$1,000 then multiplying this by the table factor:

\$144,000 / \$1,000 = 144 x 7.00 = \$1,008

Title search, recording, and lawyer fee are an example of:

closing costs

Match the mortgage type to the related advantage:

15-year fixed rate: Lower interest. Equity builds up faster while interest costs are cut by more than one-half.

30-year fixed rate: a predictable monthly payment

Adjustable rate: ARM's have lower rates than fixed rate mortgages. Rates can be lowered without refinancing if market rate drops. Caps limit how high the rate can go.

biweekly: shorten loan term, saves on interest and builds equity twice as fast.

graduated-payment: easier to qualify for than 15 or 30 year fixed rate mortgages. Monthly payments start low and increase over time.

home equity loan: inexpensive and reliable lines of credit backed by home equity. Interest is tax deductible. Rates can be locked in.

interest-only: borrowers pay interest but no principal in the first 5 to 15 years of the loan.

which loan type has a substantial reduction in interest paid and can also reduce the length of the loan?

biweekly

refinancing should be considered if interest rates _____ .

drop

which mortgage type allows senior homeowners to borrow against their home equity, often allowing the owner to receive monthly checks?

reverse

True or False: The mortgage loan amortization table is the same type as used for installment loans.

True

Yvette took out a 30-year loan for \$122,900 at 8%. The monthly payments are \$902.09 Match each of the values to their respective terms.

Total Cost of Interest: Subtract the mortgage amount from the total of all payments. \$324,752.40 - \$122,852.40

Total of all payments: Multiply the monthly payment by the number of periods.

30 years x 12 months x 902.09 = \$324,752.40

Table Factor: N= 30 years, I = 8%, Table Factor = 7.34

Major

As of the printing of this text, what costs are tax deductible?

Interest and taxes

Match the mortgage type to the related disadvantages:

15-year fixed rate: A larger down payment is needed. Monthly payment is higher.

30-year fixed rate: locked into a higher rate in periods of falling interest. You can refinance, but will incur various costs to do so.

Adjustable Rate: Monthly payments could rise if interest rates rise. Riskier than fixed rate mortgages in regards to monthly payments.

Biweekly: extra payment made each year. Only good for those seeking early payoff of loan.

Graduated-payment: Higher APR than variable or fixed-rate mortgages.

home equity loan: you could lose your home if the loan is defaulted on. No annual or interest caps.

Interest-only: no equity is built up in the early years.

interest-only:

Subprime loans threatened the stability of the housing markets when home prices (increased, Decreased)

decreased

if one point equals 1% of the mortgage, than 3 points equals ___% of the mortgage

3%

The monthly amount to be paid in to escrow for insurance and taxes is ____ of the annual costs.

1/12

landscaping is an example of what type of cost?

repairs and maintenance.

A subprime loan is what type of mortgage.

Complete the following table:

Selling Price: \$150,000

Source : quizlet.com

So-called ARMs may be more appealing to homebuyers as interest rates continue to rise, yet it's important to weigh the pros and cons.

## An adjustable rate mortgage could mean a lower monthly payment for a while. Be sure you fully understand the risks

PUBLISHED SAT, APR 2 20229:00 AM EDT

Sarah O’Brien @SARAHTGOBRIEN WATCH LIVE KEY POINTS

The average fixed rate on a traditional 30-year mortgage is 4.67%, up from below 3% in November and the highest it’s been since late 2018.

By comparison, the initial rate on a 5/1 adjustable rate mortgage is 3.5%.

While an ARM can make sense for some homebuyers, it’s worth assessing whether it works best for your situation.

Patrick T. Fallon | Bloomberg | Getty Images

As interest rates tick upward, it may be tempting for homebuyers to explore adjustable rate mortgages.

The appeal of an ARM, as it’s called, can be the lower initial interest rate compared with a traditional 30-year fixed-rate mortgage. However, that rate can change down the road — and not necessarily in your favor.

“There is a lot of variability in the specific terms as to how much the rates can go up and how quickly,” said certified financial planner David Mendels, director of planning at Creative Financial Concepts in New York. “No one can predict what rates will do, but one thing is clear — there is a whole lot more room on the upside than there is on the downside.”

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Interest rates remain low from a historical perspective but have been rising amid a housing market that already is posing affordability challenges for buyers. The median list price of a home in the U.S. is \$405,000, up 14% from a year ago, according to Realtor.com.

The average fixed rate on a 30-year mortgage is 4.67%, up from below 3% in November and the highest it’s been since late 2018, according to the Federal Reserve Bank of St. Louis. By comparison, the average introductory rate on one popular ARM is at 3.5%.

With these mortgages, the initial interest rate is fixed for a set amount of time.

After that, the rate could go up or down, or remain unchanged. That uncertainty makes an ARM a riskier proposition than a fixed-rate mortgage. This holds true whether you use an ARM to purchase a home or to refinance a loan on a home you already own.

If you’re exploring an ARM, there are a few things to know.

For starters, consider the name of the ARM. For a so-called 5/1 ARM, for instance, the introductory rate lasts five years (the “5”) and after that the rate can change once a year (the “1″).

Don’t just think in terms of a 1% or 2% increase. Could you cope with a maximum increase?

David Mendels

DIRECTOR OF PLANNING AT CREATIVE FINANCIAL CONCEPTS

Some lenders also offer ARMs with the introductory rate lasting three years (a 3/1 ARM), seven years (a 7/1 ARM) and 10 years (a 10/1 ARM).

Aside from knowing when the interest rate could begin to change and how often, you need to know how much that adjustment could be and what the maximum rate charged could be.

“Don’t just think in terms of a 1% or 2% increase,” Mendels said. “Could you cope with a maximum increase?”

Mortgage lenders employ an index and add an agreed-upon percentage point (called the margin) to arrive at the total rate you pay. Commonly used benchmarks include the one-year Libor, which stands for the London Interbank Offered Rate, or the weekly yield on the one-year Treasury bill.

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So if the index used by the lender is at 1% and your margin is 2.75%, you’ll pay 3.75%. After five years with a 5/1 ARM, if the index is at, say, 2%, your total would be 4.75%. But if the index is at, say, 5% after five years? Whether your interest rate could jump that much depends on the terms of your contract.

An ARM generally comes with caps on the annual adjustment and over the life of the loan. However, they can vary among lenders, which makes it important to fully understand the terms of your loan.

Initial adjustment cap. This cap says how much the interest rate can increase the first time it adjusts after the fixed-rate period expires. It’s common for this cap to be 2% — meaning that at the first rate change, the new rate can’t be more than 2 percentage points higher than the initial rate during the fixed-rate period.Subsequent adjustment cap. This clause shows how much the interest rate can increase in the adjustment periods that follow. This number is commonly 2%, meaning that the new rate can’t be more than 2 percentage points higher than the previous rate.Lifetime adjustment cap. This term means how much the interest rate can increase in total over the life of the loan. This cap is often 5%, meaning that the rate can never be 5 percentage points higher than the initial rate. However, some lenders may have a higher cap.

An ARM may make sense for buyers who anticipate moving before the initial rate period expires. However, because life happens and it’s impossible to predict future economic conditions, it’s wise to consider the possibility that you won’t be able to move or sell.

Source : www.cnbc.com

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James 15 day ago

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