Question

Lucia and Randy have signed a contract to purchase a home. The closing date is March 27, and the buyer owns the property on the day of closing. The selling p rice of the home is $852,500. Lucia and Randy obtained a fixed-rate mortgage from a bank for $665,000 at 7.55% interest. The seller has already paid $15,378.15 in property taxes for the coming year. How much will Lucia and Randy owe in prorated expenses?

Answer 1

@phi can you help me with this one?

Answer 2

I am not an accountant, but I assume they will have to repay the owner for some of the taxes. March 26 is the 85th day of the year (for a non-leap year)
so the original owner owes 85/365 of the taxes and L & R owe (365-85)/365
of the taxes.

Answer 3

They will also owe $852,500 - $665,000

Answer 4

so 76.7% of the taxes plus 187500?

Answer 5

owe in prorated expenses
I assume that is just the taxes. The difference between the price and loan is not a pro-rated expense (is it ?)

Answer 6

no?

Answer 7

I don't study this stuff, just using common sense. Pro-rated means to divide, assess, or distribute (something) proportionately

They do that with the taxes, but not with the difference between the price and loan

Answer 8

right. That makes sense.

Answer 9

so the answer should be 11795.04

Answer 10

I don't know how many days they use for a full year. It might be 365.25 or it might be 365 or 366 depending on if its a leap year. Or they might always use 365. It will make a small difference.

Answer 11

I think that is right. I have another question it is different. Do you think you could help me?

Answer 12

what is it ?

Answer 13

4. Jerry is purchasing a condominium for $325,500 and has financed 90% of it. He has purchased
3 discount points, has to pay a 1.65% origination fee and a brokerage fee of $100 plus 0.25% of the loan. What are his total fees that he must pay? (1 point)
$15,461.25
$16,293.64
$14,454.56
$15,317.13

Answer 14

I thought the answer was 16,293 but the answer is 14454.56 but I am not sure how they got that or what I did wrong.

Answer 15

loan amount is 90% of 325,500

Answer 16

yes,

Answer 17

loan amt is 292,950
3 discount points
Each discount point generally costs 1% of the total loan
I get 0.03*292,950= 8,788.50
has to pay a 1.65% origination fee 0.0165*Loan= 4833.66

brokerage fee of $100
0.25% of the loan= 732.38

Answer 18

I did 325500*.9=292950 then I did 292950*.0025=735.375 +100= 832.375. Then I did 1.65+3=4.65 then 325500*.0465=15135.75 Then I added and got 1535.75+832.38=15968.13

Answer 19

Oh. The discount points are from the cost of the loan not the total cost!

Answer 20

Thank you. I was doing everything on the original cost not the cost of the loan! Thank you for your help!

Answer 21

if you were just borrowing 10% of the cost (you saved the rest and don't need a big loan) you surely would not want to pay fees on the original price, just the loan.