Mortgage Loan: total cost w/, w/out down-payment

The Young Family is purchasing a $130,000 house with a VA mortgage. The bank is offering them a 25 year mortgage with an interest rate of 9.5%. They have $20,000 invested that could be used for a down payment. Since they do not need a down payment, Mr. Young wants to keep the money invested. Mrs. Young believes that the should make a down payment of $20,000.

a. determine the total cost of the house with no down payment.
25 years x 12 months in 1 year = 300 months

300 payments x 9.5% equals 12350.00 (which 200,121 is interest)

b. determine the total cost of the house if they make a down payment of $20,000.

300 payments
I am not even sure what do do here...

c. If the youngs use the 20,000 investment will have an annual rate of return of 10% compounded quarterly. Assuming that Mr. Young is right, calculate the value of investments in 25 years.

12350 + 961.07= 13311.07

d. determine the difference of the monthly payments in parts a and b?

e. assume the difference in monthly payments part d is invested each month rate at at rate of 6% compounded monthly for 25 years. Determine the value of investment in 25 years. ???

f. would you invest or not invest the 20,000?

please help..i have no idea if i am doing it right or wrong?

Thanks

jjaynes09 said:

a. determine the total cost of the house with no down payment.

25 years x 12 months in 1 year = 300 months
300 payments x 9.5% equals 12350.00 (which 200,121 is interest)

Click to expand...

Is the last line your attempt? HOW did you get 12,350 and 200,121?

The Young Family is purchasing a $130,000 house with a VA mortgage. The bank is offering them a 25 year mortgage with an interest rate of 9.5%. They have $20,000 invested that could be used for a down payment. Since they do not need a down payment, Mr. Young wants to keep the money invested. Mrs. Young believes that the should make a down payment of $20,000.
a. determine the total cost of the house with no down payment.
25 years x 12 months in 1 year = 300 months
300 payments x 9.5% equals 12350.00 (which 200,121 is interest)
b. determine the total cost of the house if they make a down payment of $20,000. 300 payments
I am not even sure what do do here...
c. If the youngs use the 20,000 investment will have an annual rate of return of 10% compounded quarterly. Assuming that Mr. Young is right, calculate the value of investments in 25 years.
12350 + 961.07= 13311.07
d. determine the difference of the monthly payments in parts a and b?
e. assume the difference in monthly payments part d is invested each month rate at at rate of 6% compounded monthly for 25 years. Determine the value of investment in 25 years. ???
f. would you invest or not invest the 20,000?
please help..i have no idea if i am doing it right or wrong?
Thanks


The formula for determing the monthly payment of a loan is
R = Pi/[1 - (1 + i)^(-n)] where R = the monthly payment (often referred to as the rent), P = the principal amount of the loan, i = I%/100n and n = the number of payments.

If P is an amount deposited into an account paying a periodic interest, then S is the final compounded amount where S = P(1 + i)^n.

The formula for determining the accumulation of a series of periodic deposits made at the beginning of each period over a specified time span is S(n) = R[{(1 + i)^(n + 1) - 1}/i - R].

a) The monthly payment for a loan of $130,000 repaid over a period of 25 years at 9.5% annual interest is $1,135.79 for a total outlay of $340,738.80 over the 25 year period. The net, out of pocket, cost for the loan is therefore $210,738.80.

b) The monthly payment for a loan of $110,000 repaid under the same conditions is $931.05 for a total of $288,315 over the 25 year period. The net, out of pocket, cost for the loan is therefore $178,315.

c) The accumulated sum of $20,000 invested at 10% annual interest with interest compounded quarterly is $236,234.

d) The difference in monthly payments is $174.74.

e) The accumulated sum, S(n), of a monthly deposit of $174.74 at the beginning of each month into an account paying 6% annual interest, compounded monthly, over the 25 year period is $120,919.

f) Your call.

How does a student loan affect your credit? I have a student loan that is about 50K. I am making payments on it but I am on the income contingent plan and every month I get a statement showing that what Im paying is not enough to pay even the interest, so the balance is higher every month. Does this negatively affect my credit, I pay every month on time but I want to know if this will affect my credit. Does the 50K count towards debt to available credit ratio also. How does the student loan affect credit ratings?
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