Financial Markets and Institutions (2-downloads)

14. A mortgage on a house worth $350,000 requires what

down payment to avoid PMI insurance?

15. Consider a shared-appreciation mortgage (SAM) on a

$250,000 mortgage with yearly payments. Current mar-

ket mortgage rates are high, running at 13%, of which

Loan

Amount

Interest

Rate

(%)

Type of

Mortgage

Discount

Points

Option 1

$100,000

6.75

30-year fixed

none

Option 2

$150,000

6.25

30-year fixed

1

Option 3

$125,000

6.0

30-year fixed

2

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Chapter 14 The Mortgage Markets

343

W E B   E X E R C I S E S

The Mortgage Markets

1. You may be looking into acquiring a home in the near

future. One common question you may have is how

large a mortgage loan you can afford. Go to

http://interest.com

and click on the “Mortgage” tab

and then on “calculators.” Choose the “mortgage

required income calculator.” Input your expected

future salary data. How large a mortgage can you

afford according to the calculator? Increase your debt

to see the impact on the amount of mortgage loan you

will qualify for.

2. One of the more difficult decisions faced by home-

owners is whether it pays to refinance a mortgage loan

when rates have dropped. Go to