A Homeowner Has Been Offered Three Alternative Mortgage Loans to Finance

question 41

Essay

A homeowner has been offered three alternative mortgage loans to finance the purchase of a $300,000 house. The interest rate on the first alternative is 8 percent for twenty-five years, and the loan requires a 20 percent down payment. The second mortgage loan is also for twenty-five years with an interest rate of 7 percent but requires a down payment of a third of the cost of the house. The third loan also requires a third down but is for 20 years at 6 percent. What are the annual mortgage payments required by each loan?

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Definitions:

Negotiable Instrument

A written document guaranteeing the payment of a specific amount of money to a specified person, which can be transferred by endorsement or delivery.

Dishonored

A term used to describe a financial instrument, such as a check or promissory note, that has been refused acceptance or payment.

Personal Defense

A liability defense that is not applicable to holders in due course.

Modification

A change or alteration, often to a contract or agreement, altering its terms or conditions.