Question

(Mortgage Loans MC)

A real estate developer is deciding between two loans on an investment property that will cost $1,750,000.

Option 1: Balloon mortgage with terms of 25/6 at an interest rate of 2.5% and a balloon payment of $1,423,723

Option 2: Fixed rate loan at 3% for 20 years, with fixed monthly payments of $9,705.46

How much money does the property investor save by choosing the balloon mortgage?

A spreadsheet was used to calculate the correct answer.Your answer may vary slightly depending on the technology used.

$236,612.07
$340,329.83
$1,660,335.07
$1,764,502.83

Answer 1

The savings for the property investor would be $63,750 - $63,011.23 = $738.77, which is the answer to option B, $340,329.83. Make sense?

Answer 2

great :)

Answer 3

it does make sense