Mortgage with amorization period of 25 years BUT Y?

In summary: The newspaper or website would likely list the current interest rates for a variety of loans, such as a mortgage. Alternatively, you could look into a mortgage calculator (such as this one) to see how much you would need to pay per month in order to have a 25-year amortization.
  • #1
aisha
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Ron and Lynda are purchasing a new home. They will need to borrow $90 000 for the home.

The amortization period which best fits their financial situation is 25 years, Discuss why this might be so?

I have no idea why? They don't give enough information only what Ron and Lyda are borrowing How I supposed to know why 25 years is good for them? Anyone any ideas?
 
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  • #2
What have you done so far? Do you not like to show work or something?
 
  • #3
aisha said:
Ron and Lynda are purchasing a new home. They will need to borrow $90 000 for the home.

The amortization period which best fits their financial situation is 25 years, Discuss why this might be so?

I have no idea why? They don't give enough information only what Ron and Lyda are borrowing How I supposed to know why 25 years is good for them? Anyone any ideas?
Whether a 25 year amortization best fits their financial situation depends on more than the principal amount. It depends on the effective interest rate (ie. the nominal rate, the payment period and the compound period). So the question is incomplete.

What they do is work out how much they can afford to pay per month and then determine what the minimum amortization period is that provides a monthly payment of that amount.

AM
 
  • #4
My teacher said to find out the current interest rate then calculate the R value and discuss. Where will I find out the current interest rate? How will I calculate for R which formula will I be using? :redface:
 
  • #5
aisha said:
My teacher said to find out the current interest rate then calculate the R value and discuss. Where will I find out the current interest rate? How will I calculate for R which formula will I be using? :redface:
Hav e look at the financial section of your newspaper to see what rates are being charged for mortgages. Or go http://www.bankofcanada.ca/en/interest-look.htm .

AM
 
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Related to Mortgage with amorization period of 25 years BUT Y?

1. What is a mortgage with an amortization period of 25 years?

A mortgage with an amortization period of 25 years refers to the length of time it will take for a borrower to fully pay off their mortgage loan. This means that the borrower will make payments towards their loan for a period of 25 years until the entire amount is paid off.

2. What is an amortization period?

An amortization period is the length of time it takes for a borrower to pay off their mortgage loan in full. This period is typically measured in years and the longer the amortization period, the lower the monthly payments will be, but the more interest the borrower will end up paying in total.

3. What is the significance of a 25-year amortization period?

A 25-year amortization period is a common length of time for a mortgage loan. It allows borrowers to make lower monthly payments compared to a shorter amortization period, making it more affordable for them. However, a longer amortization period also means paying more interest over the life of the loan.

4. Can the amortization period be changed?

Yes, the amortization period can be changed depending on the lender's policies and the borrower's financial situation. Some lenders may allow for a longer or shorter amortization period, but this could also affect the interest rate and overall cost of the loan.

5. What factors should I consider when choosing an amortization period?

When choosing an amortization period for your mortgage loan, it is important to consider your financial situation, your long-term goals, and the interest rate offered by the lender. A shorter amortization period may mean higher monthly payments, but it also means paying less interest in the long run. A longer amortization period may make payments more affordable, but it also means paying more interest over time.

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