You need a 35-year, fixed-rate mortgage to buy a new home for $260,000. Your mortgage bank will lend you the money at an APR of 5.55 percent for this 420-month loan. However, you can afford monthly payments of only $1000. so you offer to pay off any remaining loan balance at the end of the loan in the form of a single balloon payment. How large will this balloon payment have to be for you to keep your monthly payments at $1:000?

$345,050

Explanation:

An annual percentage rate (APR) is the annual rate that is paid on amount borrowed or received from an investment. It is usually stated as a percentage which indicates the annual cost of funds over the term of a loan.

From the question we have:

Mortgage loan amount = $260,000

Monthly repayment amount affordable = $1,000

ARR = 5.55%

Monthly ARR = 5.55% ÷ 12 = 0.4625%

Mortgage loan tenure in years = 35

Mortgage Loan tenure in months = 35 × 12 = 420

ARR amount payable monthly = Mortgage Loan × Monthly ARR

                                                  = $260,000 × 0.4625%

                                                  =  $1,202.50

Total ARR amount payable = ARR amount payable monthly × Mortgage Loan tenure in months

Total ARR amount payable = $1,202.50 × 420

                                             = $505,050.00  

Total mortgage loan to repay after 35 years = Mortgage loan amount + Total ARR amount payable

Total mortgage loan to repay after 420 months = $260,000 + $505,050

                                                                                = $765,050  

Total repayment amount affordable = Monthly repayment amount affordable × Mortgage Loan tenure in months

Total repayment amount affordable = $1,000 × 420

                                                            = $420,000

 Balloon payment after 420 months = Total mortgage loan to repay after 420 months - Total repayment amount affordable

Balloon payment after 420 months = $765,050 - $420,000

                                                           = $345,050  

Therefore, the balloon payment have to be as large as $345,050 to keep monthly payments at $1,000.

forbearance of student loan payments. under forbearance, your loan payments are postponed (or reduced) but interest continues to accrue during the period of forbearance. if you don't pay the interest during that period, the interest may be “capitalized,” which means it is added to your principal balance.