## anonymous one year ago 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?

1. anonymous

@ganeshie8 @whpalmer4

2. anonymous

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

3. whpalmer4

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

4. 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.

5. anonymous

can u set it up for me in a formula?

6. anonymous

in an equation?

7. 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...

8. anonymous

oh

9. anonymous

do u have i guess for this question?

10. anonymous

have choices

11. whpalmer4

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

12. anonymous

okay ill poest em A:\$750,869.29

13. anonymous

B:752,436.54

14. anonymous

C:956,512.80

15. anonymous

D:536,378.10

16. anonymous

you got it?

17. anonymous

Hello?

18. 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!

19. 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...

20. 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.