You purchase a house that costs $625,000 with a 8%, 30-year mortgage. In order to avoid PMI insurance, you decide to follow a conforming mortgage by making a down payment of 20%.
1. What is your monthly payment?
2. Amortize the first and second payments.
3. What is the mortgage balance after 5 years?
4. What percentage of the principal is paid off after 5 years?
5. Suppose after 5 years you refinance at 6% the remaining balance at a cost of $10,000, for 30 years. What is your new monthly payment?
6. Further, suppose you maintain the same payments as in (1), i.e. pre-pay on the principal, how many YEARS until you pay off the mortgage?