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Mortgage with amorization period of 25 years BUT Y?

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  1. Mar 20, 2005 #1
    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 dont 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?
     
  2. jcsd
  3. Mar 22, 2005 #2
    What have you done so far? Do you not like to show work or something?
     
  4. Mar 22, 2005 #3

    Andrew Mason

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    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
     
  5. Mar 22, 2005 #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:
     
  6. Mar 22, 2005 #5

    Andrew Mason

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    Hav e look at the financial section of your newspaper to see what rates are being charged for mortgages. Or go here.

    AM
     
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