Closing Costs & The Monthly Payment Lesson 6.5

Closing Costs 6.5a

Closing costs are any extra fees charged at the time the house is transferred. Sum of Bank fees

Step 1) Down Payment Step 3) Closing Costs D.P. = 95,500(0.15) Trudy and Jeremy Hallett have been granted a mortgage loan for $95,500. There is an annual interest rate of 8%. The loan is for a period of 25 years. They need a 15% down payment. What are the total closing costs? What is the actual amount financed with the mortgage? Step 1) Down Payment Step 3) Closing Costs Closing Costs Credit Report $65.00 Loan Origination 2% of Mortgage Abstract of Title $120.00 Attorney Fee $250.00 Documentation Stamp 0.3% of Mortgage Processing Fee 1.10% of Mortgage Total D.P. = 95,500(0.15) D.P. = $14,325 Step 2) Mortgage Amt. M.A.= 95,500 – 14,325 M.A. = $81,175 $3,194.96 Step 4) Amount Financed A.F. = 81,175 + 3,194.96 A.F. = $84,369.96

You were granted a mortgage loan for $85,000 You were granted a mortgage loan for $85,000. There is an annual interest rate of 8%. The loan is for a period of 30 years. You need a 15% down payment. Find the total costs. Find the amount financed with the mortgage. Step 1) Down Payment Step 3) Closing Costs D.P. = 85,000(0.15) C.C.= 65 + 72250(.02) + 120 + 250 + 72250(.003) + 72250(.011) D.P. = $12,750 Step 2) Mortgage Amt. = 65 + 1445 + 120 + 250 + 216.75 + 794.75 M.A.= 85,000 – 12,750 M.A. = $72,250 C.C. = $2,891.50 Step 4) Amount Financed A.F. = 72,250 + 2,891.50 A.F. = $75,141.50

Monthly Payment Section 10.4

I=PRT Monthly Payment Pay to Principal = - Interest New Principal = Previous Principal - Pay to Principal

Rod and Carey Finn obtained a 30-year, $80,000 Rod and Carey Finn obtained a 30-year, $80,000.00 mortgage loan from State Bank and Trust. The interest rate is 8 percent. Their monthly payment is $587.20. For the first payment what is the interest? What is the payment to principal? What is the new principal. Step 1) Interest I = 80,000(0.08)(1/12) I = $533.33 Step 2) Payment to Principal P. to P. = 587.20 – 533.33 P. to P. = $53.87 Step 3) New Principal New P. = 80,000 – 53.87 New P. = $79,946.13

Suppose after the 327th payment of a $80,000 30-year loan, you have a principal balance of $17,117.15. and are making equal monthly payments of $587.20. Find the new principal after payment 328. Step 1) Interest I = 17,117.15(0.08)(1/12) I = $114.11 Step 2) Payment to Principal P. to P. = 587.20 – 114.11 P. to P. = $473.09 Step 3) New Principal New P. = 17,117.15 – 473.09 New P. = $79,946.13

6.5: Closing Costs & Monthly Payment Questions Summarize your notes Homework Worksheet