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- anonymous

Joshua finances $512,300 with a 30/11 balloon mortgage at 4.7%. How much will he pay for principal and interest over the life of the loan?

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- anonymous

- katieb

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- anonymous

- anonymous

just help me set up the problem adn ill try to figure out the answer

- whpalmer4

Okay, I'm not sure what a 30/11 balloon means — is that 30 year loan, but balloon due after 11 years?

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- whpalmer4

Ah, I think that means the loan amortization is calculated as if a 30 year loan, but after 11 years the remaining balance is due in the final balloon payment.
So, calculate an amortization table for a 30 year loan, 4.7% APR. Total up the interest paid in the first 11*12-1 = 131 payments. Then total up the principal paid in those payments along with the remaining balance.

- anonymous

can u set it up for me in a formula?

- anonymous

in an equation?

- whpalmer4

Sorry, I don't have a formula for you. There are online calculators which will do it for you, or you can use a spreadsheet, or maybe someone has a formula...

- anonymous

oh

- anonymous

do u have i guess for this question?

- anonymous

have choices

- whpalmer4

what are the choices, we can see if I figured it out correctly :-)

- anonymous

okay ill poest em A:$750,869.29

- anonymous

B:752,436.54

- anonymous

C:956,512.80

- anonymous

D:536,378.10

- anonymous

you got it?

- anonymous

Hello?

- whpalmer4

ah, yes, I did get one of those. made a mistake in my arithmetic the first time, though, so it didn't look like I did, had to redo it!

- whpalmer4

you can clearly rule out D, as you're going to pay $512,300 in principal and that only leaves 24,000 and change for interest, which is clearly too low for use of half a million for 11 years!
C also seems safe to rule out, as a rule of thumb is that a 30 year mortgage costs you about as much in interest as principal, and we are skipping 19 years of interest by doing the balloon payment.
to choose between A and B, though, you need to do the math, or be a lucky guesser...

- whpalmer4

Ah, found a formula for you:
http://www.financeformulas.net/Loan_Balloon_Balance.html
You'll need to figure out the regular payment to use it, but you should know how to do that, I hope. If not, you should be able to find it at that site, or in your course materials.

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