Question

Dennis and Darla have a 15/6 balloon mortgage for $178,800 with a rate of 3.95%. How much will they pay in interest over the life of the loan?

Answer 1

is the 15/6 a ratio?

Answer 2

refers to the terms of the mortgage

Answer 3

15 means that the beginning fixed monthly payments are going to be calculated as if
the mortgage would be paid off in 15 years

Answer 4

okay

Answer 5

and the 6 means?

Answer 6

You calculate the mortgage payment based on 15 years.
You pay this 15=year amount for six years only.
The balance is due at the end of six years. This would be the "balloon" part.

Answer 7

@Hope_nicole The 6 means that fixed payments will be made for 6 years. After the 6 years, the balloon payment is due.

Answer 8

okay, so the life of the loan is 6 years..a mortgage(aka starting value) of 178800 and a rate of 3.95, correct?

Answer 9

The life of the loan is six years, but the payments during those six years are calculated as if the life of the loan were 15 years.

Answer 10

@Hope_nicole correct

Answer 11

@sunil186 Joanne and Bill are financing $305,500 to purchase a house. They obtained a 20/6 balloon mortgage at 5.75%. What will their balloon payment be?

Answer 12

I don't see any progress, here. Can you calculate the payment for the 20-year mortgage?

Answer 13

@tkhunny i have no idea how to do this. I'm soooooo confused

Answer 14

Seriously? You must step up your game a little.

financing $305,500
20/6 balloon mortgage
5.75%

I = 0.0575
j = i/12 = 0.004792
v = 1/(1+j) = 0.995231

20 year mortgage \(305500 = Pmt*(v + v^2 + ... + v^240) = \dfrac{v - v^{241}}{1-v}\)

Solve that to find the Payment for the 20-year mortgage.

Pay this for six years.

\(Balloon Payment = Pmt*\dfrac{v - v^{169}}{1-v}\)

Really, they only get trickier, not easier. You must be very clear on all of this.

Answer 15

@tkhunny I got $36,132.26 ...

Answer 16

You will have to provide MUCH more information. That is not very close and I have no idea why. You didn't share anything.

Reality Check: You honestly believe that 39132.26 / 305500 = 13% only 13% of a 20 year loan remains after 6 years? Try more like 80% Things have to make sense.