Say you bought a house for $275,000 with 10% down, and financed it from a bank for a 30-year term at 4.75% interest per year compounded monthly. If you paid an extra $1,000 every year (end of 12th month) along with the regular month-end payments, which will be true from the following?

a. You will be able to cut off 42 full payments and a partial payment from the loan.
b. You will have to make only 315 payments.
c. You will have to make 316 payments of $1,291.08 each, pay $1,000 at the end of the first 26 years, & make a 317th payment of $1,194.97.
d. You will have to make 316 paymnents of $1,291.08 each & make a 317th payment of $1,190.26.

d. You will have to make 316 payments of $1,291.08 each, pay $1,000 at the end of first 26 years and make a 317th payment of $1,190.26.

Explanation:

The house is bought for $275,000 and 10% down payment is made. The down payment amounts $27,500. The amount after down payment will be $247,500 paid in monthly installments which is financed by 30 year term bank loan. The bank loan interest is compounded monthly so there will be 316 payments of $1,291.08. The last payment is 317th payment amounting 1,194.97.

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of the three mortgage options that demarco and tanya have to choose from, the balloon payment mortgage would be their best option, over adjustable payment and fixed payment plans.ultimately, the balloon payment plan would save demarco and tanya overall, in interest, would cost less monthly, and they would only have to make these payments for 8 years, opposing to 30 years for adjustable or fixed payment plans. 

overall, demarco and tanya would save $80,811 if they chose balloon payments over fixed payments, and would save $116,711 if they choose balloon payments over adjustable payments. benefits with choosing fixed payments over adjustable payments is that, in the end, the payments will still be $836.30 a month, while with adjustable payments, the initial monthly payments will be $763.38 to $1082.70 a month, ultimately leading to a more costly purchase. benefits with choosing fixed payments over balloon payments are not present. benefits in choosing adjustable payments over is that it has a lower interest rate, and starts with lower monthly payments initially. benefits in choosing adjustable payments over balloon payments include a lower interest rate, and lower initial monthly payments. benefits in choosing balloon payments over fixed payments include lower interest rates, lower overall price, lower monthly payments, takes less time to pay off, and does not require a downpayment. benefits in choosing balloon payments over adjustable payments include, lower monthly payments (when averaged), takes less time to pay off, and lower overall price.

hence, option c, balloon payments, is the best option for demarco and tanya to make this purchase, for it will save them a minimum of $80811, and a maximum of $116,711.