4D Concept Check

If you make monthly payments of $1000 on a 10-year loan, your total payments over the life of the loan amount to

$120,000

A $120,000 loan with $500 in closing costs plus 1 point requires an advance payment of

$1700

A loan of $200,00 that carries a 2-point origination fee requires an advance payment of

$4000

Consider two mortgage loans with the same amount borrowed and the same APR. Loan 1 is fixed for 15 years, and Loan 2 is fixed for 30 years. Which statement is true?

Loan 1 will have higher monthly payments, but you'll pay less total interest over the life of the loan.

With the same APR and amount borrowed, a 15-year loan will have

a higher monthly payment than a 30-year loan.

With the same term and amount borrowed, a loan with higher APR will have

a higher monthly payment than a loan with a lower APR

Credit card loans are different from installment loans in that

credit card loans do not have a set loan term

In the loan payment formula, assuming all other variables are constant, the monthly payment

increases as P increases

You are currently paying off a student loan with an interest rate of 9% and a monthly payment of $450. You are offered the chance to refinance the remaining balance with a new 10-year loan with an interest rate of 8%, which will give you a significantly lower monthly payment. Refinancing in this way

may or may not be a good idea, depending on closing costs and how many years are remaining in your current loan term.

In the early year of a 30-year mortgage loan

most of the monthly payment goes to interest