Ch.18 The Cost Of Home Ownership Full Test Bank 1st Edition

Chapter 18

The Cost of Home Ownership

True/False Questions
 

1. Subprime loans are very safe. 
True    False

2. The amount of the down payment one makes on a home directly affects the size of the monthly payment. 
True    False

3. Interest rates on mortgages do not vary from bank to bank. 
True    False

4. A variable rate mortgage is always fixed. 
True    False

5. Graduated payments let the borrower pay more at the beginning of the mortgage and make lower payments later. 
True    False

6. A point is 1% of the amount of the loan. 
True    False

7. Points are to be paid off as part of the regular monthly payment. 
True    False

8. The total of all monthly payments plus the amount of the mortgage equals the total cost of interest. 
True    False

9. Interest is equal to principal times rate divided by time. 
True    False

10. The reduction of principal each month is equal to the payment minus the interest. 
True    False

11. Banks cannot provide amortization schedules to borrowers. 
True    False

12. The major portion of the monthly payment is used to pay off the principal. 
True    False

13. A larger down payment is needed for a 18-year fixed rate mortgage than for a 30-year fixed rate mortgage. 
True    False

14. A mortgage of $80,000 with 2 points means the borrower would have to pay at closing $800. 
True    False

15. All mortgages must be paid monthly. 
True    False

16. A biweekly mortgage results in six extra payments per year. 
True    False

17. The monthly payment on a home purchased for $120,000 with 20% down at 8% for 25 years is $741.12. 
True    False

18. The monthly payment on a home purchased for $150,000 with 30% down at 13% for 30 years is $1,132.53. 
True    False

19. A monthly payment of $850 on a 30-year $80,000 mortgage results in a total cost of interest of $226,000. 
True    False

20. The total cost of interest on a home purchased for $200,000 with 30% down at 7% for 35 years is $235,732. 
True    False

21. Bill's monthly payment is $1,056 per month. The principal is $100,000 at a rate of 12 1/2% for 35 years. The amount of interest for Bill's first payment is $1,011.67. 
True    False

22. Abby's monthly payment is $781.60 per month. The principal is $80,000 at a rate of 11 1/2% for 35 years. The principal reduction after the first mortgage payment is $14.93. 
True    False

Multiple Choice Questions
 

23. A variable rate mortgage means: 
A. The interest rate is not fixed
B. The interest rate is fixed for five years
C. The rate is not subject to change
D. Larger monthly payments than a fixed rate
E. None of these

24. Graduated payments result in the borrower paying: 
A. More at the beginning of the mortgage
B. Less at the beginning of the mortgage
C. Less at the end of the mortgage
D. The mortgage at 1/2 the standard rate
E. None of these

25. Points represent: 
A. 2% of the amount of the loan
B. Monthly payments
C. An additional cost of receiving the mortgage
D. 3% up-front payment
E. None of these

26. Megan Mei is charged 2 points on a $120,000 loan at the time of closing. The original price of the home before the down payment was $140,000. The points in dollars cost Megan: 
A. $2,400
B. $2,800
C. $4,200
D. $8,200
E. None of these

27. All mortgage payments must be paid: 
A. Weekly
B. Monthly
C. Biweekly
D. Semiannually
E. None of these

28. Ben Brown bought a home for $225,000. He put down 20%. The mortgage is at 6 ½% for 30 years. His monthly payment is: 
A. $1,319.04
B. $1,319.40
C. $1,216.80
D. $1,137.72
E. None of these

29. Chin Woo bought a home for $160,000. He put down 20%. The mortgage is at 8 1/2% for 25 years. His yearly payments are: 
A. $1,238.00
B. $12,507.10
C. $12,830.61
D. $12,380.61
E. None of these

30. The total cost of interest is equal to the total of all monthly payments: 
A. Divided by amount of mortgage
B. Minus amount of mortgage
C. Plus amount of mortgage
D. Times amount of mortgage
E. None of these

31. The difference between the monthly payments on a $120,000 home at 6 ½% and at 8% for 25 years is:
A. $81.12
B. $151.02
C. $115.93
D. $91.12
E. None of these

32. Stu Reese has a $150,000 7 ½% mortgage. His monthly payment is $1,010.10. His first payment will reduce the principal to an outstanding balance of: 
A. $149,729.40
B. $149,927.40
C. $72.60
D. $149,910.40
E. None of these

33. An amortization schedule shows: 
A. Balance of interest outstanding
B. The increase to principal
C. Increase in loan outstanding
D. Portion of payment broken down to interest and principal
E. None of these

34. Craig Hammer purchased a new condominium for $225,000. The bank required a $30,000 down payment. Assuming a rate of 8% on a 25-year mortgage, Craig's monthly payment is:
A. $1,431.30
B. $1,413.30
C. $1,505.04
D. $1,505.40
E. None of these

35. Abe Aster bought a new split level for $200,000. Abe put down 30%. Assuming a rate of 11 1/2% on a 30-year mortgage, Abe's monthly payment is:
A. $1,423.80
B. $1,386.41
C. $1,367.80
D. $1,982.00
E. None of these

36. Dick Hercher bought a home in Homewood, Illinois, for $230,000. He put down 20% and obtained a mortgage for 25 years at 8%. The total interest cost of the loan is: 
A. $184,000.00
B. $327,372.80
C. $242,043
D. $242,144
E. None of these

37. Bill Moore took out an $80,000 mortgage on a ski chalet. The bank charged 4 points at closing. The points in dollars cost Bill: 
A. $800
B. $3,200
C. $2,400
D. $1,600
E. None of these

38. Joe Jay purchased a new colonial home for $260,000, putting down 20%. He decided to use Loyal Bank for his mortgage. They were offering a 6 1/2% for a 25-year mortgage. The principal after the first payment had a balance outstanding of: 
A. $207,270.95
B. $207,792.24
C. $207,720.95
D. $207,270.59
E. None of these

39. Jill Diamond bought a home for $190,000 with a down payment of $65,000. The rate of interest was 7% for 35 years. Her monthly mortgage payment is: 
A. $843.75
B. $834.57
C. $798.57
D. $978.57
E. None of these

40. Lizzy Clar bought a home for $160,000, putting down $30,000. The rate of interest is 7% for 25 years. The total yearly mortgage payment is: 
A. $11,155.37
B. $11,920.20
C. $919.10
D. $18,782.40
E. None of these

41. Tom Burke buys a home in Virginia for $139,000. He puts down 30% and obtains a mortgage for 25 years at 12%. The portion of the first payment that covers interest is: 
A. $52.54
B. $1,025.54
C. $973.00
D. $97.30
E. None of these

42. Marsha Terban bought a home for $119,000 with a down payment of $19,000. Her rate of interest is 12 1/2% for 35 years. The balance of the mortgage at the end of the first month is: 
A. $3.33
B. $98,944
C. $99,669.76
D. $99,986.42
E. None of these

43. Beverly Frost bought a home for $190,000 with a down payment of $19,000 at 7% for 25 years. Since then the rate has risen to 9%. How much more would her monthly payment be if she bought the house at 9%? 
A. $208.97
B. $436.40
C. $143.00
D. $226.44
E. None of these

44. A $104,000 selling price with $24,000 down at 8 1/2% for 25 years results in a monthly payment of: 
A. $644.18
B. $645.60
C. $546.06
D. $654.60
E. None of these

45. Amanda Chin purchased a home for $296,000; she put 20% down with a mortgage rate of 6% for 30 years. What is Amanda’s monthly payment?

A. $1,776

B. $1,402

C. $1,240.80

D. $1,420.80

E. None of these

46. Darlene Ramirez bought a home for $140,000. She put 20% down with a mortgage rate at 7.5% for 25 years. Her yearly payments are:

A. $1,776

B. $10,047.60

C. $12,415.20

D. $9,329.61

E. None of these

47. With a mortgage of $48,000 for 15 years with a rate of 11%, what are the total finance charges? Assume annual payments

A. $52,126.97

B. $5,023.68

C. $545.76

D. $54,576

E. None of these

48. A condo in Orange Beach, Alabama, is listed for $1.4 million with 20% down and financing at 5% for 30 years. What would the monthly payment be?

A. $7,518

B. $6,012.40

C. $6,041.20

D. $7,815.00

E. None of these

49. Jen purchased a condo in Naples, Florida, for $699,000. She put 20% down and financed the rest at 5% for 35 years. What are Jen’s total finance charges?

A. $457,425.60

B. $606,823.20

C. $626,128.20

D. $600,000.00

E. None of these

Short Answer Questions
 

50. 1. Amortization schedule
2. Biweekly
3. Graduated payments
4. Mortgage
5. Points
6. Variable rate
7. Short sale
A. Loan
B. Not fixed
C. Breakdown of principal and interest
D. One-time up-front payment
E. Mortgage payments rise in later years
F. 26 payments per year
G. Can prevent foreclosure 

51. With a selling price of $125,000, a down payment of $20,000, and a mortgage rate of 10% for 30 years, calculate:
A. Principal
B. Monthly mortgage payment
A. _______________
B. _______________

52. With a selling price of $125,000, a down payment of $20,000, and a mortgage rate of 10% for 30 years, calculate the total cost of interest. 

53. With a selling price of $125,000, a down payment of $20,000, and a mortgage rate of 10% for 30 years, if the loan was for 25 years, what would be the difference in the total interest cost of the loan? 

54. With a mortgage of $88,000 at 11% for 25 years, by what amount is the principal reduced the first month? 

55. Al Bank is worried about financing his new home. The house sells for $190,000. If he puts down 20%, what will Al's payment be at the following rates?
  
A. _____________
B. _____________
C. _____________
D. _____________
What would be the total cost of interest over the cost of the loan for each assumption?
  
E. _______________
F. _______________
G. _______________
H. _______________ 

56. With a selling price of $140,000, a 20% down payment, and interest at 10 ½% for 25 years, calculate:
A. Amount of mortgage
B. Monthly payment
C. Interest portion of first payment
D. Principal portion of first payment
A. ________________
B. ________________
C. ________________
D. ________________ 

57. A condo is advertised in the Wall Street Journal for $350,000. It states in the ad that a 20% down payment is required. The rate of interest is 11% on a 25-year mortgage. What would be (A) the monthly payment and (B) the total cost of interest? 

58. Jackie Revez purchased a new home in Riverside Park. The purchase price was $210,000, and she put down 30%. Her mortgage is 10 1/2% for 30 years. What is the outstanding balance of her loan after the first month? 

59. Angie Roy took out an $80,000 mortgage on a ski chalet in Vermont. The bank charged 3 points at closing. What did the points cost Angie at closing? 

60. Nancy Karnes bought a home for $143,000 with a down payment of $15,000. Her rate of interest is 9% for 35 years. Calculate her:
A. Monthly payment
B. First payment broken down into interest and principal
C. Balance of mortgage at end of month 

61. John Lee bought a home in Des Moines, Iowa, for $65,000. He put down 15% and obtained a mortgage for 30 years at 8 1/2%. What is (A) John's monthly payment and (B) the total interest cost of the loan? 

62. Alice Roa is concerned about the financing of a home. She saw a home selling for $120,000. If she puts 10% down, her monthly payment will be:
A. 30 years 8%
B. 30 years 9%
C. 30 years 10%
D. 30 years 11%
E. What is the total cost of interest over the cost of the loan for each assumption? 

63. Joy Linman bought a home in Boca Raton, Florida, for $350,000 with a down payment of $50,000. Her rate of interest is 9 1/2% for 25 years. Calculate Joy's monthly mortgage payment. 

64. Joy Linman bought a home in Boca Raton, Florida, for $350,000 with a down payment of $50,000. Her rate of interest is 9 1/2% for 25 years. Calculate the total cost of interest for Joy Linman. 

65. With a selling price $88,000, a down payment of $24,000, and a mortgage rate of 13% for 30 years, calculate:
A. Principal
B. Monthly mortgage payment 

66. With a selling price of $95,000, a down payment of $20,000, and a mortgage at 10% for 30 years, calculate:
A. Principal
B. Monthly mortgage payment 

67. With a selling price of $88,000, a down payment of $24,000, and a mortgage at 13% for 30 years, calculate the total cost of interest. 

68. With a selling price $95,000, a down payment $20,000, and a mortgage of 10% for 30 years, calculate the total cost of interest. 

69. Assume a selling price of $88,000, a down payment of $24,000, and a mortgage at 13% for 30 years. If the loan was for 25 years, what would be the difference in the total interest cost of the loan? 

70. Assume a selling price $95,000, a down payment of $20,000, and a mortgage at 10% for 30 years. If the loan was for 25 years, what would be the difference in the total interest cost of the loan? 

71.  With a mortgage of $91,000 at 12% for 25 years, by what amount is the principal reduced the first month? 

72.  With a mortgage of $80,000 at 13% for 25 years, by what amount is the principal reduced the first month? 

73.  Bang is worried about the financing of his new home. The house sells for $70,000. If he puts down 20%, what will Al's payment be at the following rates?
A. 25 years 12%
B. 25 years 13%
C. 25 years 13 3/4%
D. 25 years 14 3/4%
What would be the total cost of interest over the cost of the loan for each assumption?
E. 25 years 12%
F. 25 years 13%
G. 25 years 13 3/4%
H. 25 years 14 3/4% 

75. With a selling price of $100,000, a 20% down payment, and a mortgage at 12% for 25 years, calculate:
A. Amount of mortgage
B. Monthly payment
C. Interest portion of first payment
D. Principal portion of first payment 

76. With a selling price $150,000, a 20% down payment, and a mortgage at 13% for 25 years, calculate:
A. Amount of mortgage
B. Monthly payment
C. Interest portion of first payment
D. Principal portion of first payment 

77. John Smith is buying a condominium for $90,000. He is putting down $10,000 at the time of closing. John must pay in addition 2 points. Calculate the cost of the points. 

78. Bill Smoss buys a chalet for $85,000 in the White Mountains of New Hampshire. He puts down $15,000. At the time of closing, he must pay in addition 3 points. In dollars what does that represent in regard to the points? 

79.  Janet Fence bought a home for $100,000 with a down payment of $20,000. The rate of interest was 7% for 35 years. Calculate her monthly mortgage payment. 

80. Marvin Bass bought a home for $180,000, putting down $50,000. The rate of interest is 14% for 25 years. Calculate his monthly mortgage payment. 

81. Marvin Bass bought a home for $180,000, putting down $50,000. The rate of interest is 14% for 25 years. Calculate the total cost of interest for Marvin Bass. 

82.  Marsh Terban bought a home for $120,000 with a down payment of $30,000. Her rate of interest is 12 1/2% for 35 years. Calculate her (A) monthly payment, (B) first payment broken down into interest and principal, and (C) balance of mortgage at the end of the month. 

83. Tom Burke buys a home in Virginia for $125,000. He puts down 40% and obtains a mortgage for 30 years at 11%. What is (A) Tom’s monthly payment and (B) the total interest of the loan? 

84. Tom Burke buys a home in Virginia for $125,000. He puts down 40% and obtains a mortgage for 30 years at 11%. If Tom could have obtained a 1% reduction from 11% to 10% in the mortgage rate, by how much would his monthly payment be reduced? 

85. Bill Byad bought an oceanfront condominium for $79,900, with $6,900 down. Assuming an interest rate of 14 1/2% for 30 years, (A) what is the monthly payment and (B) if 1 point is charged at closing, what will that be in dollars? 

86. Bill Byad bought an oceanfront condominium for $79,900 with $6,900 down. If the mortgage rate was 15% instead of 14 1/2% for 30 years, what would be the difference in the monthly payment? 

87. If a home sells for $150,000 with one-third down at a rate of 11% for 25 years, calculate (A) amount of mortgage and (B) the monthly payment. 

88. Calculate the balance outstanding after the first payment. Given: selling price of $150,000, one-third down, and an 11% mortgage for 25 years. 

89. Mindy bought a home for $249,500 with a down payment of $30,000. Her rate of interest is 6.5% for 35 years. Calculate her monthly payment.

90. Shelley purchased a home in Maryland Heights, MO, for $204,000. Her down payment was 20% of the cash price, and she obtained a mortgage for 20 years at 7%. What are Shelley’s monthly payment and total finance charges?

91. With a mortgage of $100,000 at 7% for 15 years, prepare a one-month amortization schedule. What is the balance after the first month’s payment?

92. Jamie purchased a condo for $89,900 with a down payment of 20%; her credit terms were 5% for 15 years. What is Jamie’s monthly payment?

93. Kerry has a $1,973 per month mortgage payment. He decides the refinance his $204,000 balance at 5% over 20 years. What is his new monthly payment?